2015 (4) TMI 19 - 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 245 HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961 challenged based on the judgment of the Bombay High Court.

Analysis:
The Supreme Court addressed the issue of the validity of Sections 245 HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961, as amended by the Finance Act, 2007. The Bombay High Court had previously examined these provisions in a batch of writ petitions. The High Court found the provisions to be violative of Article 14 but refrained from invalidating them. Instead, the High Court suggested that Section 245HA(1)(iv) could be read down to avoid unconstitutionality. The High Court's conclusion was that the cutoff date of 31st March, 2008 was arbitrary, and the provisions of Section 245HA(1)(iv) to that extent would also be arbitrary. The High Court proposed a reading of Section 245HA(1)(iv) to mean that proceedings would abate only if delayed due to reasons attributable to the applicant. The Settlement Commissioner was directed to assess if delays were applicant-caused and proceed accordingly.

In its assessment, the Supreme Court found the High Court's judgment to be well-considered and declined to interfere with it. The Court dismissed all the special leave petitions filed by the Union of India challenging the High Court's judgment. The Supreme Court upheld the High Court's interpretation and application of the law regarding the challenged provisions of the Income Tax Act, 1961. The decision reinforced the importance of carefully considering constitutional validity and ensuring that provisions are interpreted in a manner that upholds the rule of law and fairness in tax proceedings.