2015 (4) TMI 18 - SC - Income Tax

Settlement commission - Validity of Sections 245 HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961, as amended by Finance Act, 2007 challenged - Time limits were set for completion of a particular stage of the proceedings. - High Court found 2009 (8) TMI 86 - BOMBAY HIGH COURT the aforesaid provisions to be violative of Article 14 etc but at the same time, it did not invalidate these petitions as the High Court was of the opinion that it was possible to read down the provisions of Section 245HA(1)(iv) in particular to avoid holding the provisions as unconstitutional - Held that - The conclusion arrived at by the high court that fixing the cutoff date as 31st March, 2008 was arbitrary the provisions of Section 245HA(1)(iv) to that extent will be also arbitrary. Also held that it is possible to read down the provisions of Section 245HA(1)(iv) in the manner set out earlier. This recourse has been taken in order to avoid holding the provisions as unconstitutional. Having so read, we would have to read Section 245HA(1)(iv) to mean that in the event the application could not be disposed of for any reasons attributable on the part of the applicant who has made an application under Section 245C. Consequently only such proceedings would abate under Section 245HA(1)(iv). Considering the above, the Settlement Commissioner to consider whether the proceedings had been delayed on account of any reason - No interference in HC judgment required - Appeal of Union of India dismissed.

Summary

Issues:
Validity of Sections 245HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961 as amended by Finance Act, 2007 challenged in writ petitions.

Analysis:
The Supreme Court addressed the correctness of judgments rendered by the Bombay High Court in a batch of writ petitions filed by various assessees challenging the validity of Sections 245HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961. The High Court found these provisions to be violative of Article 14 but did not invalidate them. Instead, the High Court held that it was possible to read down the provisions of Section 245HA(1)(iv) to avoid them being declared unconstitutional. The High Court concluded that fixing the cutoff date as 31st March, 2008 was arbitrary, and thus, the provisions of Section 245HA(1)(iv) to that extent would also be arbitrary. The High Court suggested that the Settlement Commissioner should consider whether the proceedings had been delayed due to reasons attributable to the applicant, and if not, to proceed with the application as if not abated. Additionally, the High Court recommended that more Benches of the Settlement Commission should be appointed for early disposal of pending applications, especially in locations with heavy pendency like Delhi and Mumbai.

The Supreme Court, after considering the detailed reasoning and conclusions of the High Court, found the judgment to be well-considered and declined to interfere. Consequently, the Supreme Court dismissed all the appeals filed by the Union of India, upholding the decision of the Bombay High Court regarding the interpretation and application of Sections 245HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961 as amended by Finance Act, 2007.