2016 (12) TMI 675 - HC - Income Tax

Validity of order passed by Income-tax Settlement Commission under Section 245D(4) - whether orders without jurisdiction and barred by limitation - Held that - On the conjoint reading of Sections 245C, 245D(4A) and Section 245HA(1)(iv) and considering the aims and objects of the legislation and the delay caused in passing the order was not attributable to the applicant, the Court was pleased to hold that only when the Settlement Commission is prevented from fulfilling its mandatory statutory duty due to any reason attributable to the applicant, only in that situation, the time-limit for disposal of an application under s.245D(4A)(i) will have to be read as may . Therefore, at any stretch of imagination it can be said that the mandatory statutory duty cast upon the Settlement Commission to dispose of the application within the time frame fixed under Section 245D(4A) is taken out. In that view of the matter, the judgment in Star Television News case 2009 (8) TMI 86 - BOMBAY HIGH COURT is not applicable to the facts of the present case as sought to be contended by the Revenue. The order passed by the Settlement Commission dated 27.5.2016 is beyond the time after the proceedings before it stood abated. As also contended by the Revenue that the petitioner having submitted letter dated 9.2.2016 and contended that the limitation is available up to 31.12.2016, the contrary contentions raised by the petitioner are unreasonable and unacceptable. It is to be mentioned here that consent of the parties cannot vest jurisdiction or extend the period of limitation. In that view of the matter, the said contention raised by the Revenue is hereby rejected. - Decided in favour of assessee

Issues Involved:
1. Jurisdiction and limitation of the Income-tax Settlement Commission's orders.
2. Validity of digital evidence and procedural compliance.
3. Abatement of proceedings under Section 245HA of the Income Tax Act.
4. Competency of the agency retrieving digital evidence.
5. Levy of penalty and principles of natural justice.

Detailed Analysis of the Judgment:

1. Jurisdiction and Limitation of the Income-tax Settlement Commission's Orders:
The petitioner challenged the orders passed by the Income-tax Settlement Commission under Section 245D(4) of the Income Tax Act, 1961, on the grounds of being without jurisdiction and barred by limitation. The petitioner argued that the orders dated 27th May 2016 and 11th August 2016 were passed beyond the statutory time limit prescribed under Section 245D(4A)(iii) of the Act, which mandates the Settlement Commission to pass an order within 18 months from the end of the month in which the application was made. The application was filed on 6th February 2014, and the order should have been passed by 31st August 2015. The court found that even after excluding the period for which stay was granted, the order dated 27th May 2016 was beyond the limitation period, resulting in the abatement of proceedings under Section 245HA(1)(iv) of the Act.

2. Validity of Digital Evidence and Procedural Compliance:
The petitioner contended that the digital evidence referred to by the Department was not properly authenticated and that the procedure followed in relation to the digital evidence was flawed. The petitioner argued that the digital evidence provided by the Department did not match the alleged non-disclosure amount and was not reliable. The court did not delve into the validity of digital evidence, as it disposed of the petitions on the ground of abatement of proceedings.

3. Abatement of Proceedings under Section 245HA of the Income Tax Act:
The court held that the Settlement Commission's failure to pass the order within the prescribed time limit resulted in the abatement of proceedings under Section 245HA(1)(iv) of the Act. The court emphasized that the statutory duty to pass the order within the specified period is mandatory and not directory. The court rejected the Revenue's reliance on the Bombay High Court's judgment in Star Television News Ltd. v. Union of India, stating that the facts and circumstances of the present case were different, and the mandatory statutory duty could not be taken out.

4. Competency of the Agency Retrieving Digital Evidence:
The petitioner argued that the agency which retrieved the digital evidence was not competent and that the Department did not follow the standard operating procedure. The petitioner claimed that the report obtained from the private party was not reliable. The court did not address this issue in detail, as the petitions were disposed of on the ground of abatement of proceedings.

5. Levy of Penalty and Principles of Natural Justice:
The petitioner contended that the levy of penalty under Section 271(1)(c) of the Act was in violation of the principles of natural justice, as no opportunity of hearing was granted. The court quashed the orders and demand notices, stating that if penalty orders are to be passed, they should be done only after hearing the petitioner.

Conclusion:
The court allowed the writ petitions, quashing the orders dated 27th May 2016 and 11th August 2016, and all consequent orders and demand notices. The court held that the proceedings before the Settlement Commission had abated due to the failure to pass the order within the prescribed time limit, and any penalty orders under Section 271(1)(c) should be passed only after granting an opportunity of hearing to the petitioner.

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