2021 (3) TMI 90 - HC - Income Tax

Settlement of cases - Application of petitioner under Section 245C - grievance of petitioner against not granting interim stay while granting statutory right available to an assessee to move for settlement of cases under Chapter XIX-A - Order of Single Judge Bench - HELD THAT - As rightly argued by Senior Advocate Aravind P Datar the consideration of stay vis-a- vis Exts.P1 and P2 by this Court would not also cause prejudice or hardship to the Department, in view of Section 153B explanation (i). At this junction Exts.P1 and P2 result in assessment orders, then the claim or right of petitioner is adversely affected. Department, as on date, has not challenged the order of learned Single Judge directing receipt of application of petitioner under Section 245C of the Act - objections raised by Advocate P.K.R. Menon appearing for the Department that the application of petitioner is taken on file, and in such an event the Settlement Commissioner has to withdraw the case relating to the subject Assessment Year from the assessing officer, but the stay on Exts.P1 and P2 would preclude the Commissioner from summoning the file and this is an avoidable situation as well in the total circumstances of the case The order under appeal could be modified and is accordingly modified as follows (a) There shall be an interim stay of Exts.P1 and P2 series during the pendency of the writ petition, subject to the following (b) The interim order granted by this Court shall not be understood as, in any manner, restricting the discretion available to the authorities under Chapter XIX-A of the Income Tax Act, either to admit or process the application of petitioner for settlement, and/or withdraw and summon the subject assessment files to the Office of the Settlement Commissioner from the Office of the Assessing Officer.

Summary

Issues:
1. Interim stay of Exts.P1 and P2 series under Chapter XIX-A of the Income Tax Act.
2. Prima facie case for granting interim stay.
3. Applicability of Section 153B Explanation (i) in the case.
4. Consideration of stay vis-a-vis Exts.P1 and P2.
5. Modification of the order under appeal.

Analysis:
1. The writ petitioner appealed against an interim order refusing to grant interim stay of Exts.P1 and P2 series under Chapter XIX-A of the Income Tax Act. The petitioner argued that the Union Finance Bill 2021 repealed Section 245C of the Act, denying the statutory right to move for settlement. The petitioner sought directions to receive their application under Section 245C. The learned Single Judge directed the application's acceptance but declined to grant a stay on Exts.P1 and P2. The appeal challenged this decision.

2. Senior Counsel for the appellant contended that the rejection of interim stay while accepting the settlement application would cause hardship. The assessing officer's actions could affect the petitioner's settlement rights. It was argued that the petitioner satisfied the prima facie case for a stay on Exts.P1 and P2. The appellant sought appropriate stay orders alongside the application acceptance.

3. The respondent's counsel argued that accepting the application presupposed lawful consideration and future orders by the Settlement Commissioner. Referring to a Supreme Court judgment, it was contended that a stay on further proceedings after Exts.P1 and P2 was unnecessary once an application under Section 245C was admitted for consideration.

4. The High Court analyzed the arguments and modified the order under appeal. It granted an interim stay on Exts.P1 and P2 during the writ petition's pendency. However, the stay did not restrict authorities from processing the petitioner's settlement application or withdrawing assessment files for settlement consideration. The interim order's corollary was subject to the final outcome of the writ petition.

5. In conclusion, the writ appeal was allowed, and the High Court's modified order provided for an interim stay on Exts.P1 and P2 series under Chapter XIX-A of the Income Tax Act, ensuring the petitioner's right to settlement consideration while maintaining flexibility for the authorities to process the application.