2013 (9) TMI 52 - HC - Income Tax

Jurisdiction of Settlement commission - Scope of the term 'Case' - No assessment proceedings were pending on the date of application - Time to issue notice u/s 143(2) to complete the assessment under Section 143(3) expired - Held that - , though there may be some merit in the contention raised on behalf of the revenue viz. that where time limit to issue notice under Section 143(2) of the said Act has expired, then in such a case, it cannot be stated that assessment is pending before the Assessing Officer. This is particularly so as under Section 246A of the said Act, an appeal can be filed by the Assessee to the Commissioner of Income Tax (A) from an intimation received under Section 143(1) of the Act. Therefore, even if the notice of intimation for the relevant year is in appeal before an Appellate Authority, it would still be open to an assessee to file an application before the Settlement Commission so long as no order of assessment under Section 143(3) of the said Act has been passed within the period of time provided under Section 153 of the Act. Binding Nature of Circular - Held that - as the Circulars issued by the CBDT are binding upon the authorities under the Act, we see no reason to interfere with the order of Settlement Commission as the Apex Court has taken a view in respect of Income Tax matters in Catholic Syrian Bank Ltd. v/s. CIT 2012 (2) TMI 262 - SUPREME COURT OF INDIA that Circulars issued by the CBDT which are beneficial to the assessee must be applied Binding nature of the Circular which is contrary to the statutory provisions of the Act - Applicability of decision of Apex Court in the matter of Commissioner of Central Excise v/s. Ratan Melting & Wire Industries 2008 (10) TMI 5 - SUPREME COURT OF INDIA - Held that - In the aforesaid decision, the Constitutional Bench of the Apex Court was considering the binding nature of a circular issued under the Central Excise Act, 1944 which were contrary to decisions rendered by the Supreme Court. The above decisions are not applicable to the facts of the present case inasmuch as our attention has not been invited to any decision of the Apex Court or of any High Court which has taken a view contrary to the view expressed by the CBDT in a Circular dated 12 March 2008. Thus, there being no ruling of the Apex Court or any High Court taking a view contrary to the CBDT Circular dated 12 March 2008, the circular has a binding force upon the revenue and they cannot contend to the contrary. The decision of the Apex Court in the matter of Ratan Melting & Wire Industries (2008 (10) TMI 5 - SUPREME COURT OF INDIA) distinguished. - Decided in favor of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Settlement Commission to entertain the application for settlement for Assessment Year 2010-11.
2. Interpretation of the term "pending assessment" under Section 245A(b) of the Income Tax Act.
3. Binding nature of CBDT Circulars on the Income Tax Department.

Detailed Analysis:

1. Jurisdiction of the Settlement Commission:
The revenue challenged the Settlement Commission's order dated 31 December 2012, which allowed the settlement application for Assessment Year 2010-11. The revenue argued that the Settlement Commission lacked jurisdiction since no assessment proceedings were pending as of the application date (14 November 2012). The time to issue a notice under Section 143(2) had expired, making it impossible to complete the assessment under Section 143(3).

2. Interpretation of "Pending Assessment":
The respondent argued that the assessment was still pending because no final assessment had been made. They relied on the Supreme Court decision in Assistant Commissioner of Income Tax v/s. Rajesh Jhaveri Stock Brokers P. Ltd., which stated that an intimation under Section 143(1) is not an assessment. The respondent also cited Explanation (iv) of the proviso to Section 245A(b), which deems an assessment to commence from the first day of the assessment year and conclude on the date the assessment is made. Additionally, CBDT Circular No.3 of 2008 clarified that an intimation under Section 143(1) is not an assessment order, and the time limit for issuing a notice under Section 143(2) is immaterial for filing a settlement application.

3. Binding Nature of CBDT Circulars:
The court emphasized that CBDT Circulars are binding on the Income Tax authorities. The circular dated 12 March 2008, which clarified that an intimation under Section 143(1) is not an assessment and that the time limit for issuing a notice under Section 143(2) is irrelevant for settlement applications, was upheld. The court referenced the Supreme Court's rulings in K.P. Varghese v/s. Income Tax Officer, Ernakulam, and Catholic Syrian Bank Ltd. v/s. CIT, which affirmed that beneficial circulars must be applied and are binding on the department.

Conclusion:
The court dismissed the revenue's petition, affirming the Settlement Commission's jurisdiction to entertain the settlement application for Assessment Year 2010-11. The court held that the CBDT Circular dated 12 March 2008 was binding on the revenue, and there was no contrary ruling from the Supreme Court or any High Court. The purpose of Chapter IXA of the Income Tax Act, which provides for settlement, was to encourage tax defaulters to pay taxes with immunity from prosecution and penalty, justifying a beneficial interpretation of the term "case" under Section 245A(b).

Final Judgment:
The writ petition was dismissed with no order as to costs.