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2019 (8) TMI 996 - HC - Income TaxValidity of proceedings u/s 153A - validity of order passed by ITSC u/s 245 D (4) - after abatement of the proceedings before the ITSC by virtue of an order passed u/s 245D (4) - limitation - HELD THAT - No inconsistency between Clause (v) of Explanation 1 below Section 153 read with the second proviso thereto as they stood prior to 1st April 2017 and Section 153 B read with Clause (iv) below the Explanation thereto read with the first proviso which only dealt with the abatement of proceedings before the ITSC as a result of an order u/s 245 D (1) and not as in the present case an order u/s 245 D (4). In the instant case the order passed by the ITSC on 4th August 2016 is an order under Section 245D (4) it enlarges the period of extension of limitation by one year in terms of further proviso to Section 153 below Explanation 1 that would apply. In terms thereof the notices issued to the Petitioners on 6th April 2017 cannot be said to be time barred. Consequently the objection raised by the Petitioners to the said notice was rightly rejected by the Respondent No.2 by the second impugned order dated 4th July 2017. The ground on which the impugned orders dated 4th August 2016 of the ITSC are assailed are that they did not account for the numerous interlocutory orders earlier passed by the ITSC in the same matter that prima facie found in favour of the Petitioners. As already discussed earlier the impugned final order dated 4th August 2016 of the ITSC u/s 245 D (4) was passed after a detailed report was received from the PCIT. This was a comprehensive report which provided more than adequate justification for the decision of the ITSC to conclude that there had not been a full and true disclosure by the Petitioners of all relevant facts. The impugned order dated 4th August 2016 of the ITSC calls for no interference. The period during which the present petitions were pending in this Court shall stand excluded for calculating the period within which the impugned assessments have to be completed.
Issues Involved:
1. Interpretation of Sections 153, 153B, 245D, and 245HA of the Income Tax Act, 1961. 2. Validity of the order dated 4th August 2016 passed by the Income Tax Settlement Commission (ITSC) under Section 245D(4). 3. Validity of notices dated 6th April 2017 issued under Section 143(3) read with Section 153A for AYs 2009-2010, 2010-2011, and 2011-2012. 4. Validity of the impugned letter and notice dated 4th July 2017 under Section 142(1). Detailed Analysis: 1. Interpretation of Sections 153, 153B, 245D, and 245HA: The core issue revolves around the interpretation of Sections 153, 153B, 245D, and 245HA of the Income Tax Act, 1961. The petitioners challenged the ITSC's order under Section 245D(4) and subsequent notices under Sections 143(3) read with 153A and 142(1). The Court had to determine whether the ITSC's order was correctly issued under Section 245D(4) and if the notices were time-barred. 2. Validity of the ITSC Order dated 4th August 2016: The ITSC's order dated 4th August 2016 rejected the settlement applications of the petitioners, stating they did not make a "full and true disclosure" of income. The petitioners contended this order should be considered under Section 245D(1) rather than 245D(4), arguing that the ITSC could only pass orders providing terms of settlement under Section 245D(4). The Court, however, held that the ITSC has the authority to reject applications under Section 245D(4) for failure to make a full and true disclosure. The Court cited Ajmera Housing Corporation v. CIT and other precedents to affirm that the ITSC can reject applications at any stage if the conditions under Section 245C(1) are not met. The Court concluded that the order dated 4th August 2016 was validly passed under Section 245D(4). 3. Validity of Notices dated 6th April 2017: The petitioners argued that the notices issued on 6th April 2017 were time-barred, as the limitation period expired on 10th October 2016. The Revenue contended that the limitation period was extended by one year from the date of the ITSC's order (4th August 2016) due to the abatement of proceedings under Section 245HA. The Court agreed with the Revenue, stating that the limitation period for completing the assessment was extended by one year from the date of abatement. The Court referred to the second proviso to Section 153 and Section 245HA, concluding that the notices issued on 6th April 2017 were within the extended limitation period and thus valid. 4. Validity of the Impugned Letter and Notice dated 4th July 2017: The petitioners objected to the assessment proceedings initiated by the notices dated 4th July 2017, arguing they were time-barred. The Court, having established the validity of the notices issued on 6th April 2017, dismissed this objection, affirming that the assessment proceedings were not time-barred. Conclusion: The Court dismissed the writ petitions, upheld the ITSC's order dated 4th August 2016, and validated the notices issued on 6th April 2017 and 4th July 2017. The Court emphasized that the ITSC has the authority to reject settlement applications under Section 245D(4) and that the limitation period for completing assessments was correctly extended by one year from the date of the ITSC's order due to the abatement of proceedings. The interim orders were vacated, and no costs were awarded.
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