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2024 (11) TMI 172 - HC - Income TaxEligibility of the petitioners to file applications for settlement in terms of the provisions contained in Section 245C following the amendments to the provisions contained in Chapter XIX-A of the 1961 Act by the Finance Act, 2021 - HELD THAT - Even though the time-frames mentioned in the Explanation Clause only identified the period of exclusion with reference to each of the proceedings taken out of the definition of case by operation of the provisos which were deleted (as already noticed, two provisos deleted in 2010 and the rest were deleted in 2014) the Explanation Clauses that were ancillary to the provisos, continued to remain in the statute book. With the deletion of the provisos, the Explanation Clauses cannot by themselves control or restrict the definition of case in Section 245A(b). If the interpretation now sought to be canvassed by the Revenue is accepted, the legislative intent behind the deletion of the provisos will not be achieved and the period which was originally excluded by operation of the provisos read with the explanations will become the period during which an application for settlement could be filed. This is, obviously, not the intention of the parliament. It is settled that where two views are possible and one produces anomalous results it is the duty of the Court to adopt the view that does not produce anomalous results. The right that had accrued to eligible assessees to approach the Income- tax Settlement Commission until the the Finance Act, 2021 came into force on 01-04-2021 remained vested in them and such rights continued to be enforceable notwithstanding the amendment to the relevant provisions. A Division Bench of the Bombay High Court in Senapati Santaji Ghorpade Sugar Factory Ltd. 2024 (4) TMI 204 - BOMBAY HIGH COURT and in Vishwakarma Developers 2024 (8) TMI 366 - BOMBAY HIGH COURT essentially take the same view. We are in respectful agreement with the views expressed in those cases. The order issued by the Central Board u/s 119(2) of the 1961 Act permitted the actual filing of applications by assessees who are entitled to make such applications by 30.9.2021. Thus upon the interpretation that has been placed on the amended provisions of Chapter XIX-A of the 1961 Act and taking into consideration of the order issued under section 119(2) of the 1961 Act. Since it is not disputed before me that the search u/s 132 in the case of all the petitioners in these cases was prior to 31-03-2021, the persons/entities, who were subject matter of the search, will be entitled to maintain an application for settlement before the Interim Settlement Board, provided such application has been filed on or before 30-09-2021. These writ petitions are therefore ordered directing that if the search u/s 132 in respect of the petitioners was prior to 31-03-2021, the petitioners are entitled to maintain applications for settlement before the Interim Board for Settlement, provided such applications were filed on or before 30-09-2021. Orders issued by the Interim Board for Settlement finding the applications for settlement filed by the petitioners as not maintainable will stand set aside.
Issues Involved:
1. Eligibility to file applications for settlement under Section 245C of the Income Tax Act, 1961, following the amendments by the Finance Act, 2021. 2. Interpretation of the term 'case' in Section 245A(b) of the Income Tax Act, 1961. 3. Impact of the Finance Act, 2021, on pending applications for settlement. 4. Authority of the Central Board of Direct Taxes to extend the deadline for filing settlement applications. Issue-wise Detailed Analysis: 1. Eligibility to File Applications for Settlement: The core issue was whether the petitioners, who were subject to searches under Section 132 of the Income Tax Act before 01-02-2021 but received notices under Section 153A after this date, could file applications for settlement under Section 245C. The Finance Act, 2021, abolished the Income-tax Settlement Commission effective from 01-02-2021, stating no applications could be made post this date. The petitioners argued that the Central Board of Direct Taxes (CBDT) extended the deadline to 30-09-2021, allowing them to file applications. The court concluded that the petitioners were entitled to file applications by 30-09-2021, as the searches occurred before 31-03-2021, and the applications were filed within the extended timeframe. 2. Interpretation of the Term 'Case': The definition of 'case' under Section 245A(b) was pivotal in determining eligibility for settlement applications. The court examined whether a 'case' was pending from the date of search or from the issuance of a notice under Section 153A. It was determined that a 'case' was pending from the date of the search, thus allowing the petitioners to file applications for settlement. The court emphasized that the deletion of certain provisos and explanations in 2010 and 2014 aimed to broaden the scope of cases eligible for settlement, supporting the petitioners' eligibility. 3. Impact of the Finance Act, 2021, on Pending Applications: The amendments by the Finance Act, 2021, aimed to abolish the Settlement Commission and establish an Interim Board for pending cases. The court noted that the amendments did not explicitly or implicitly remove the vested right of assessees to file settlement applications for cases pending before 01-04-2021. The court relied on precedents from other High Courts, which held that the right to file applications remained intact until the Finance Act, 2021, came into force on 01-04-2021. Consequently, the court ruled that applications filed before 30-09-2021 were valid. 4. Authority of the Central Board of Direct Taxes: The CBDT's authority to extend the deadline for filing settlement applications was challenged. The respondents argued that the CBDT could not extend the existence of the Settlement Commission beyond 01-02-2021. However, the court found that the CBDT's extension was valid and allowed applications to be filed until 30-09-2021, aligning with the legislative intent to facilitate settlement of pending cases. The court set aside the Interim Board's orders declaring the applications as not maintainable, directing them to be adjudicated in accordance with the law. In conclusion, the court ruled in favor of the petitioners, allowing them to maintain applications for settlement before the Interim Board, provided the applications were filed by 30-09-2021, and the searches were conducted before 31-03-2021. The judgment emphasized the legislative intent to expand the scope of settlement mechanisms and upheld the petitioners' rights under the transitional provisions of the Finance Act, 2021.
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