2022 (3) TMI 1565 - HC - Income Tax

Assessment u/s 153A - effect of ceasure of ITSC - Scope of challenge to the amendment to the Act - writ petitions were dismissed at the admission stage holding that the order passed by the Settlement Commission rejecting the applications was legal and valid - appellants challenged the circular issued by CBDT dated 28.09.2021 which permitted the assessees to file applications before the Settlement Commission not later than 30.09.2021 as being discriminatory and violative of Article 14 of the Constitution of India and also the amendment to Income Tax Act by which the Settlement Commission was abolished with effect from 01.02.2021 Commission opined that in the assessees case notice u/s 153(A) of the Act was issued on 02.02.2021 and as such the relevant assessment proceedings were not pending as on 31.01.2021 and, therefore, the assessee were directed to show cause as to why the applications filed on 08.03.2021 should not be rejected as no relevant assessment proceedings were pending as on 31.01.2021 (that is before 01.02.2021). HELD THAT - In our view, all legal issues can be considered only after the respondents file their affidavit-in-opposition. Thus, we are of the view that the writ petitions should not have been dismissed at the admission stage and should have been heard after calling for affidavits as pure questions of law are needed to be first answered before proceeding into factual matrix. We are inclined to entertain these appeals and, accordingly, these appeals are admitted. The assessing officer has already issued notices u/s 153(A) of the Act on 02.02.2021 and thereafter also issued fresh notices. Since, we have admitted the appeals; the notices issued by the assessing officer under Section 153(A) of the Act shall remain stayed till the disposal of the appeals. Respondent authorities pointed out that the assessment will get time barred by 31.03.2022 and, therefore, the assessing officer should be permitted to proceed further in the matter. The said objection is not sustainable because the explanation under Section 153(B) of the Act states that the period during which the assessment proceedings is stayed by an order or an injunction of any court stands excluded while computing period of limitation under Section 153(B) of the Act. Therefore, the Revenue s interest is sufficiently safeguarded. That apart, we also take note of the fact that the assessees by filing applications before the Settlement Commission has admitted additional income and also remitted tax and interest on the additional income so admitted. This also would go to safeguard the interest of the Revenue. Hence, the notices issued by the assessing officer remain stayed.

Summary

Issues:
1. Challenge to rejection of applications filed before the Settlement Commission.
2. Challenge to the legality and validity of the Circular issued by CBDT.
3. Challenge to the amendment abolishing the Settlement Commission.
4. Interpretation of Section 153(A) of the Income Tax Act.
5. Consideration of the definition of a case under Section 245(A)(b) of the Act.
6. Examination of the effect of the CBDT Circular extending the time to file applications.
7. Relevance of the timing of the applications filed before the Commission.
8. Stay on notices issued by the assessing officer under Section 153(A) of the Act.

1. Challenge to Rejection of Applications:
The appellants had filed appeals against the rejection of their applications by the Settlement Commission under the Income Tax Act. The writ petitions were dismissed at the admission stage, upholding the legality of the rejection order. However, the Court found that important legal questions were raised, necessitating a detailed consideration of the issues. The rejection was based on the Commission's view that relevant assessment proceedings were not pending as on 31.01.2021, thus questioning the validity of the applications filed on 08.03.2021.

2. Challenge to CBDT Circular:
The appellants also challenged the Circular issued by CBDT, alleging it was discriminatory and violated Article 14 of the Constitution of India. The Court, after examination, held that the Circular was legal and valid, issued under powers vested in Section 119(2)(b) of the Act. No unconstitutional or illegal aspects were found in the Circular.

3. Challenge to Amendment Abolishing Settlement Commission:
The appellants contested the amendment abolishing the Settlement Commission with effect from 01.02.2021. However, the Court noted that no specific finding was recorded regarding this challenge, indicating a need for further consideration.

4. Interpretation of Section 153(A) of the Act:
The Court highlighted the need to interpret Section 153(A) of the Act, particularly in conjunction with other related provisions like Section 245(a) and 245(C). The determination of whether the appellants' case falls within the definition of a case as defined under Section 245(A)(b) was deemed crucial.

5. Effect of CBDT Circular Extension:
The Court deliberated on the effect of the CBDT Circular extending the time to file applications before the Commission until 30.09.2021, raising questions about its implications and legality.

6. Timing of Applications Filed:
The timing of the applications filed before the Commission was questioned, with concerns raised about the delay in filing and its impact on the legal proceedings.

7. Stay on Notices by Assessing Officer:
The Court ordered a stay on the notices issued by the assessing officer under Section 153(A) of the Act until the disposal of the appeals. The Revenue's objection regarding the assessment getting time-barred was deemed unsustainable, with safeguards in place to protect the Revenue's interests.

In conclusion, the decision to admit the appeals and allow for further proceedings was based on the complexity and significance of the legal issues raised, emphasizing the need for a detailed examination and consideration of all relevant aspects before reaching a final decision.