2017 (9) TMI 849 - HC - Income Tax

Settlement Commission Orders - Commission declared that the proceedings had abated due to non compliance by the petitioner with the provisions of section 245D(2D) of the Act and the Assessing Officer would now dispose of the case in accordance with the provisions of subsections 2, 3 and 4 of section 245HA - Held that - The statute does not make any distinction whether the proceedings were pending before the Settlement Commission at prehearing stage or at the stage where the hearing was over and the case was pending for disposal by the Settlement Commission. The defence that the petitioner was not aware about the pendency of such proceeding ignores the documents on record. On 13.7.2007, the Settlement Commission had conveyed to the petitioner that there would be a further hearing on 7.8.2007. The footnote though was scored out in the copy forwarded to the petitioner obviously, because this did not concern the petitioner, did contain a reference to the CIT to state on the next date of hearing whether the requirement of payment of tax and interest as contained in subsection( 2D) of section 245D has been fulfilled by the petitioner. As is evident from the petitioner s letter dated 31.7.2007 written to the Settlement Commission in response to the said communication, the petitioner received the same on 13.7.2017 itself. Well before the final date of 31.7.2017 for payment of additional tax and interest, the petitioner at any rate was aware that the proceedings before the Settlement Commission was not yet disposed of. The petitioner therefore had the responsibility to pay the tax and interest as provided in section (2D) of section 245D of the Act. The petitioner failed to comply with such requirement. In terms of subsection( 1) of section 245HA therefore, the settlement proceeding would abate. This was automatic. The Settlement Commission by the impugned judgment merely made a declaration of abatement which had even otherwise come about by virtue of operation of law. The Settlement Commission had no other alternative. The alternative request of preventing the income-tax authority from using the material on record before Settlement Commission cannot be accepted in terms of plain language used in subsection( 3) of section 245HA of the Act. As noted, the petitioner has not challenged the vires of this provision.

Summary

Issues Involved:
1. Challenge to the order of the Settlement Commission dated 11.12.2007.
2. Request to prevent the income tax authorities from using confidential information produced before the Settlement Commission.
3. Applicability and constitutionality of amendments to Chapter XIXA of the Income Tax Act, particularly section 245HA.

Issue-wise Detailed Analysis:

1. Challenge to the Order of the Settlement Commission:

The petitioner, a partnership firm, challenged the order dated 11.12.2007 passed by the Settlement Commission, which declared the proceedings abated due to non-compliance with section 245D(2D) of the Income Tax Act. The petitioner argued that the hearing was concluded on 08.11.2006, and the order should have been passed without the need for further compliance with the amended provisions introduced on 01.06.2007. However, the court noted that the amendments applied to all pending proceedings, regardless of their stage, and the petitioner was aware of the requirement to pay additional tax by 31.07.2007 but failed to do so. Therefore, the abatement of the proceedings was automatic and the Settlement Commission merely declared what had already occurred by operation of law.

2. Request to Prevent Use of Confidential Information:

The petitioner alternatively requested that the income tax authorities be prevented from using the confidential information and reports produced before the Settlement Commission. The court referred to subsection (3) of section 245HA, which explicitly allows the Assessing Officer or any other income tax authority to use all material and information produced before the Settlement Commission in subsequent proceedings. Since the petitioner did not challenge the vires of this provision, the court found no basis to grant the requested relief. The court emphasized that no taxpayer can claim immunity from the use of material disclosed before the Commission unless specifically provided by statute.

3. Applicability and Constitutionality of Amendments:

The court examined the amendments to Chapter XIXA of the Income Tax Act, particularly section 245HA, which introduced the requirement for the assessee to pay additional tax and interest on the disclosed income by 31.07.2007 to avoid abatement of the settlement proceedings. The court upheld the constitutionality of these amendments, noting that they were intended to ensure prompt and serious pursuit of settlement applications. The court observed that the legislative intent was to prevent the pendency of settlement proceedings from indefinitely delaying the normal assessment process. The court also clarified that the amendments did not take away any vested rights of the assessee, as the liability to pay additional tax on disclosed income existed even under the previous provisions, albeit without the consequence of abatement.

In conclusion, the court dismissed the petition, affirming the validity and applicability of the statutory amendments and the automatic abatement of the settlement proceedings due to non-compliance by the petitioner. The court also upheld the right of the income tax authorities to use the material produced before the Settlement Commission in subsequent proceedings.