2017 (9) TMI 741 - HC - Income Tax

Tax amnesty schemes - Whether the appeal before CIT(A) would be terms as pending where the higher appellate authority set aside the order and restore the same before CIT(A) - Applications for settlement under the Direct Tax Dispute Resolution Scheme 2016 rejected - Held that - As noticed that the Scheme was promulgated with effect from 1.6.2016. The appellate Commissioner disposed of the appeal on 2.6.2016. There is of course, no bar in the appellate Commissioner proceeding ahead with the pending appeals merely because the Scheme was promulgated nor we see any lack of bona fide on his part in doing so. However merely because by reviving the appeals before the Commissioner, the petitioner may get benefit of the Scheme on the ground that the appeal would now be deemed to be pending on the date of declaration, should not persuade us to take a view any different from what we normally would have in such set of facts and circumstances. If by setting aside the appellate order and placing it back before the Commissioner for fresh disposal after giving an opportunity of hearing to the assessee, the resultant effect unintended or indirectly is that the petitioner s declaration of the Scheme becomes valid, so be it. The tax amnesty schemes are neither unknown nor uncommon. The legislation often times comes up with Schemes to reduce tax litigations offering reduced tax or immunity from penalty or prosecution, the prime purpose being reduction of pending taxation related litigation. The idea behind promulgation of the Scheme is not to make the Scheme and then to deny the benefit of the Scheme to as many people as possible. The idea is always to give the benefit of the Scheme to one who is otherwise eligible, makes the declaration and fulfills all conditions of the Scheme. Under the circumstances, impugned orders AnnexureB to both the petitions by which the appellate Commissioner disposed of the respective appeals, are set aside. The appeal proceedings for the assessment years 2007-2008 and 2011-2012 are revived and placed back before the appellate Commissioner Resultantly, the impugned orders at AnnexureA in both the petitions by which the designated authority had rejected the petitioner s declaration under the Scheme are also set aside. The designated authority shall take into account the changed circumstances arising out of this judgment and proceed as if on the date of the declaration for the assessment years 2007-2008 and 2011-2012, the appeals of the petitioner were pending.

Issues Involved:
1. Rejection of the petitioner's applications for settlement under the Direct Tax Dispute Resolution Scheme 2016.
2. Rejection of the petitioner's appeal against the penalty order by the Commissioner (Appeals) without proper notice.
3. Interpretation of the term "give notice" in Section 250 of the Income Tax Act, 1961.
4. Validity of the appellate order passed by the Commissioner (Appeals) ex parte.
5. Eligibility of the petitioner to avail benefits under the Direct Tax Dispute Resolution Scheme 2016.

Detailed Analysis:

1. Rejection of the Petitioner's Applications for Settlement:
The petitioner challenged the order dated 3.1.2017 by the Principal Commissioner of Income Tax, Surat, which rejected the applications for settlement under the Direct Tax Dispute Resolution Scheme 2016. This rejection was based on the fact that the petitioner's appeal against the penalty order was already decided by the Commissioner (Appeals) on 2.6.2016, making the petitioner ineligible for the Scheme as the appeal was no longer pending.

2. Rejection of the Petitioner's Appeal Without Proper Notice:
The petitioner contended that the notices dated 22.3.2016 and 23.5.2016, referred to in the appellate order, were never served. Consequently, the petitioner was unaware of the hearing dates, and the appeal was dismissed ex parte. The petitioner argued that this dismissal without proper notice violated the statutory requirement under Section 250 of the Income Tax Act, which mandates giving notice to the appellant.

3. Interpretation of "Give Notice" in Section 250:
The petitioner argued that the term "give notice" in Section 250 should be interpreted as "serve notice" to ensure proper participation in the appeal process. The respondent contended that the term "give notice" does not necessarily equate to "serve notice" and that the department had fulfilled its obligation by dispatching the notices via Speed Post to the address provided by the petitioner. The court noted the legislative use of different terms like "issue," "give," and "serve" in various contexts, suggesting that these terms carry different connotations.

4. Validity of the Appellate Order Passed Ex Parte:
The court examined whether the Commissioner (Appeals) was justified in dismissing the appeal ex parte. The court observed that the appellate process under Section 250 envisages the right of hearing and effective participation by the assessee. The appellate order should be in writing, stating the points for determination, the decision, and the reasons for the decision. The court found that the department, while showing proof of dispatch, could not prove actual service of the notices. Given the statutory scheme, the court concluded that the appellate order should be set aside and the appeal revived to ensure proper hearing.

5. Eligibility to Avail Benefits Under the Scheme:
The court noted that if the appeal is revived, it would relate back to the original date when it was dismissed, making the petitioner eligible for the Scheme. The court emphasized that tax amnesty schemes aim to reduce litigation and should benefit eligible applicants who fulfill the Scheme's conditions. Consequently, the court set aside the orders rejecting the petitioner's declaration under the Scheme and directed the designated authority to reconsider the applications as if the appeals were pending on the date of declaration.

Conclusion:
The court set aside the appellate orders dismissing the appeals ex parte and revived the appeal proceedings for the assessment years 2007-2008 and 2011-2012. The court also set aside the orders rejecting the petitioner's declaration under the Scheme, directing the designated authority to proceed as if the appeals were pending on the date of declaration. The court clarified that it expressed no opinion on other eligibility requirements of the Scheme and that the appellate Commissioner should proceed to decide the appeals after hearing the petitioner if the Scheme's benefit is not granted on other grounds. The petitions were disposed of accordingly.

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