2014 (1) TMI 1090 - HC - Income Tax

Validity of order passed u/s 245D - Rejection of application for settlement for A.Y. 2007-08, 2008-09 and 2009-10 - Held that - An assessment would be pending before Assessing Officer when such Assessing Officer has power to take action in respect of those assessment years - The power to take action in respect of the assessment for a particular assessment year, comes to an end, on the expiry of the period under Section 153 of the Act to make an assessment - Assessment could not be said to be pending before the Assessing Officer even where the time for making an assessment had expired, on the date the assessee filed its application for settlement before the Settlement Commission - Decision in CIT vs. Income Tax Settlement Commission 2012 (9) TMI 840 - GUJARAT HIGH COURT followed - As with effect from 1.6.2007, significant changes were made in the definition of the term case defined under section 245A(b) defining the term case would cover only those situations where an assessment is pending before the AO or it is still possible for him to pass any order of assessment - There is no reason to interfere with the order of the Settlement Commission dated 15 March 2013 - In view of Section 245HA of the Act, proceedings before the Settlement Commission shall abate under Section 245HA(1)(i) of the Act in respect of those years - Decided against petitioner.

Summary

Issues Involved:
1. Rejection of the petitioner's application for settlement for Assessment Years 2007-08, 2008-09, and 2009-10 by the Settlement Commission.
2. Validity of the notices issued by the Deputy Commissioner of Income Tax for reopening the assessment for Assessment Years 2008-09 and 2009-10.

Detailed Analysis:

Issue 1: Rejection of Settlement Application

The petitioner challenged the order dated 15 March 2013 by the Settlement Commission, which rejected the application for settlement for Assessment Years 2007-08, 2008-09, and 2009-10. The petitioner argued that the assessment proceedings were pending as defined in Section 245A(b) of the Income Tax Act when the application was filed on 7 March 2013. This was based on the premise that the time for initiating assessment/reassessment proceedings under Section 147/148 had not expired. The petitioner relied on Circular No. 3/2008 and a decision by the Special Bench of the Settlement Commission in Rescuwear Corporation, which deemed assessment proceedings to be pending as long as the Assessing Officer had the power to initiate proceedings.

The Settlement Commission, however, rejected the application on the grounds that no proceedings were pending for those assessment years, relying on decisions from the Gujarat High Court in Amrish Kumar Shukla and the Kolkata High Court in Outotec. The court noted that post-1 June 2007, the definition of "case" under Section 245A(b) was amended to mean only those proceedings pending before the Assessing Officer. The court emphasized that the time to make an assessment for the relevant years had expired under Section 153, thus no proceedings were pending when the application was filed.

Issue 2: Validity of Notices for Reopening Assessment

The petitioner also challenged two notices dated 30 March 2013 issued under Section 148 for reopening the assessment for the years 2008-09 and 2009-10. The petitioner contended that these notices were invalid if the order dated 15 March 2013 by the Settlement Commission was set aside. The revenue argued that the time to make an assessment order had expired, and thus no assessment proceedings were pending when the settlement application was filed. The court held that since the time limit to make an assessment had expired, the proceedings were not pending. Consequently, the Assessing Officer was entitled to issue the notices for reopening the assessment.

Court's Conclusion

The court concluded that the application for settlement was not maintainable as the assessment proceedings for the years 2007-08 to 2009-10 were not pending when the application was filed. The court upheld the Settlement Commission's order and validated the notices for reopening the assessment. The court also noted that the period during which the challenge to the notice was pending would be excluded from the limitation period for completing the assessment/reassessment under Section 147.

Final Judgment

The petition was dismissed with no order as to costs, affirming the Settlement Commission's decision and validating the notices issued for reopening the assessment.