2023 (5) TMI 885 - HC - Income Tax

Settlement applications u/s 245C (1) - qualitative difference between assessment proceedings pursuant to returns filed under Section 139 of the Act and pursuant to a notice u/s 148 - as concluded there was no case existing, thus the applications for settlement of case(s) u/s 245C was not maintainable - whether the case relating to the petitioners existed on that date? HELD THAT - The expression any proceeding for assessment under this Act as used in Clause (b) of Section 245A of the Act, would now require to be construed in wider terms. Explanation (i) to Clause (b) of Section 245A clarified that the proceedings for assessment or reassessment or re-computation u/s 147 of the Act would commence only from the date on which the notice under Section 148 of the Act is issued. Thus, it is erroneous to suggest that proceedings for reassessment or re-computation would be considered as pending even though the period for framing an assessment pursuant to the returns filed u/s 139 of the Act or in response to a notice issued u/s 142 of the Act, had expired and no notice had been issued u/s 148. The legislative history of Section 245A of the Act clearly indicates that the proceedings for assessment, re-assessment and re-computation under section 148 of the Act, prior to issuance of notice under Section 148 of the Act, were excluded from the scope of the definition of the term case . Such proceedings have been included by virtue of the Finance Act, 2015 albeit on certain conditions being satisfied as noted hereinbefore. In Commissioner of Income Tax v. Income Tax Settlement Commission decided on 20.11.2012 2012 (11) TMI 766 - DELHI HIGH COURT a Coordinate Bench of this Court had explained the qualitative difference between assessment proceedings pursuant to returns filed u/s 139 and pursuant to a notice u/s 148 - In respect of assessment proceedings u/s 143 AO has the jurisdiction to examine the returns and pass an assessment order within a period of two years from the end of the relevant assessment years. However, in cases where income has escaped the assessment, the same can be reopened only upto a specified period and subject to certain conditions being satisfied. However, the possibility that proceedings for assessment, reassessment or re-computation of income may be initiated under Section 147 of the Act, after an assessment has been framed or the period of framing assessment has lapsed, cannot be construed to mean that a case is pending under Clause (b) of Section 245A We find no merit in the contention that the literal interpretation of the provision is contrary to the legislative intent. On the contrary, retaining the Explanation to Section 245A of the Act (and subsequently amending it) serves the intended purpose of sufficiently explaining the scope of Section 245A of the Act. There is no ambiguity in Section 245A of the Act that makes it necessary or apposite for the court to discard the literal interpretation of the language of Section 245A of the Act. Petition dismissed.

Issues Involved:
1. Validity of orders passed by the Income Tax Settlement Commission.
2. Whether a 'case' existed for the Assessment Years 2012-13 and 2013-14 under Section 245A(b) of the Income Tax Act, 1961.
3. Full and true disclosure by the petitioners.
4. Interpretation of Section 245A(b) of the Act.

Summary:

Issue 1: Validity of Orders by the Income Tax Settlement Commission
The petitioners challenged the orders dated 06.02.2017 and 09.02.2017 by the Income Tax Settlement Commission, which deemed the settlement applications for Assessment Years 2012-13 and 2013-14 invalid under Section 245D(1) of the Income Tax Act, 1961.

Issue 2: Existence of a 'Case' for Assessment Years 2012-13 and 2013-14
The Commission held that no 'case' existed for the Assessment Years 2012-13 and 2013-14 as per Sub-clause (iv) of Clause (b) of Section 245A of the Act. Consequently, the applications under Section 245C were not maintainable. The Court examined whether a 'case' was pending for these years and concluded that no notice under Section 148 was issued, and thus, no proceedings were pending for re-opening any assessment for these years.

Issue 3: Full and True Disclosure
The Principal Commissioner of Income Tax (Pr. CIT) objected to the applications, arguing that the petitioners did not make a full and true disclosure, particularly regarding the expenditure on commissions to brokers. The Commission, however, did not accept this objection, noting that the petitioners had disclosed the expenditure and that the objection was presumptuous without material evidence.

Issue 4: Interpretation of Section 245A(b)
The petitioners argued for a purposive interpretation of Section 245A(b), suggesting that the legislative amendments led to an unintended result. The Court reviewed the legislative history and amendments to Section 245A(b) and concluded that the literal interpretation of the provision was consistent with legislative intent. The Court found no merit in the contention that the literal interpretation was contrary to the legislative intent and dismissed the petition.

Conclusion:
The Court upheld the Commission's decision, finding no infirmity in holding the applications for Assessment Years 2012-13 and 2013-14 invalid. The petition was dismissed as unmerited.

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