2012 (11) TMI 766 - HC - Income Tax

Settlement of Case scope of the term pending case - after the expiry of the time limit prescribed for making an order of assessment under section 143/144 of the Act. held that - If the time period to make an assessment had not expired on the date on which the settlement application was made, the commission might entertain and proceed with the same, irrespective of whether income tax returns had been filed or not. However, where the period of twenty one months from the end of the assessment year expired on the date of making of the application, the settlement application cannot be proceeded with. The expression pending in this case, has to be viewed contextually. In plain terms, it would mean when some case, cause or controversy is actually pending consideration before the assessment officer. Since no assessment order can be passed after the expiry of the prescribed time-limit, no proceeding can be taken in it. Moreover, proceeding for assessment/reassessment under section 147 are specifically excluded from the purview of case as defined under Section 245A(b). Thus, there is no question of proceedings of the type which are subject matter of this petition can be said to be pending - Assessment includes re-assessment too - impugned order of the Settlement Commission admitting the assessee s application, was contrary to law. The impugned order is accordingly set aside. The writ petition is consequently allowed.

Issues Involved:
1. Whether proceedings are deemed to remain "pending" for the purposes of section 245A(b) when the time limit for completion of assessment under section 143 or section 144 has expired.

Detailed Analysis:

1. Definition and Interpretation of "Pending" Proceedings:
- The core issue revolves around the interpretation of "pending" as per section 245A(b) of the Income Tax Act, 1961. The revenue argued that the Settlement Commission erred in law by admitting the application for settlement since there were no proceedings pending on the date the application was filed.
- Section 245A(b) defines "case" as any proceeding for assessment under the Act pending before an Assessing Officer on the date an application under section 245C(1) is made. The proviso excludes proceedings under section 147 from this definition.
- The Court referenced the Calcutta High Court's decision in the Outotech Group case, which concluded that proceedings could only be said to be pending for as long as any proceedings could be taken, excluding proceedings under section 147.
- The Court emphasized that once the statutory time limit for making an assessment order under section 153(1) expires, the proceedings are no longer pending. This interpretation prevents proceedings from being deemed to continue indefinitely if no assessment order is made.

2. Majority View of the Settlement Commission:
- The Settlement Commission, by a majority of 2:1, admitted the application for settlement despite the expiration of the time limit for making an assessment order under sections 143/144.
- The majority view was defended by the assessee's counsel, who argued that a statutory fiction under Explanation (iv) to section 245A(b) deemed a case to have commenced on the first day of the assessment year and concluded on the date the assessment is made. This implied that proceedings must be deemed pending even if no order under section 143/144 is made within the prescribed time limit.

3. Revenue's Argument:
- The revenue contended that the foundational condition for a "case" to be pending was not fulfilled as the time period for making an assessment order had expired.
- The revenue's counsel relied on decisions from the Calcutta High Court and other precedents to support the argument that proceedings are not pending if no assessment order is made within the statutory time limit.

4. Court's Interpretation and Conclusion:
- The Court agreed with the Calcutta High Court's reasoning that the term "pending" should be interpreted contextually, meaning a live cause or matter must exist, which the concerned authority is capable of resolving.
- The Court ruled that once the time limit for making an assessment order expires, the Assessing Officer loses jurisdiction, and no proceedings can be deemed pending.
- The Court concluded that Explanation (iv) to section 245A(b) should not be interpreted literally to leave proceedings in limbo indefinitely. The rule prescribed in section 153(1) must be given effect despite Explanation (iv).
- The Court held that the impugned order of the Settlement Commission admitting the assessee's application was contrary to law and set aside the order.

Conclusion:
The Court allowed the writ petition, setting aside the Settlement Commission's order that admitted the assessee's application for settlement. The Court clarified that proceedings are not deemed pending if the statutory time limit for making an assessment order has expired, aligning with the Calcutta High Court's interpretation in the Outotech Group case.

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