2019 (5) TMI 640 - HC - Income Tax

Extension of limitation - due date of passing order by Settlement Commission within eighteen months from the date of filing the applications - time taken by the petitioners in pursuing the remedy before High court would be excluded - earlier application was rejected by Commission which was restored by High Court - HELD THAT - Sub-section (4A) of section 245D mandates that the Settlement Commission passes an order u/s 245D(4) within eighteen months from the end of the month in which the application was made which period would be over on 31st May, and 30th June respectively. In this case, the Settlement Commission passed orders u/s 245D(2C) treating the applications made by the petitioners to be invalid. Against such orders, the petitioners approached this court by way of writ petitions, which came to be allowed by a judgment and order dated 4.2.2019 whereby the orders dated 2.2.2018 came to be set aside and the matters were restored to the file of the Settlement Commission. However, the operation of the judgment and order dated 4.2.2019 was stayed for a further period of four weeks so as to enable the respondent to approach the superior forum. Thus, for the period between 2.2.2018 till four weeks after 4.2.2019, there were no applications pending before the Settlement Commission and such applications were restored to the file of the Settlement Commission only pursuant to the order of this court. Therefore, the period between 2.2.2018 to four weeks after 4.2.2019 when the applications stood disposed of, cannot be taken into consideration for the purpose of computing the period of eighteen months as contemplated u/s 245D(4A). It is held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing the order under section 245D(4). Needless to state that the Settlement Commission should not wait for the entire period of eighteen months for passing the order u/s 245D(4), to be over and may decide the application as expeditiously as possible - petitions are allowed

Summary

Issues:
Challenge to order of Settlement Commission regarding extension of due date for passing order within eighteen months under Article 226 of the Constitution of India.
Consideration of time taken by petitioners in pursuing remedy before the court while computing the 18-month period under section 245D(4A) of the Income Tax Act, 1961.

Analysis:
The petitioners challenged a common order of the Settlement Commission dated 1.4.2019, which held that it lacked the power to extend the due date for passing orders within eighteen months from the date of filing applications. The High Court set aside orders that deemed the petitioners' applications invalid and restored the matters to the Settlement Commission for further consideration. The Settlement Commission, in its order dated 1.4.2019, refused to extend the due date for passing orders, leading the petitioners to approach the High Court. The main issue was whether the time taken by the petitioners in pursuing remedies before the court would be excluded while calculating the 18-month period under section 245D(4A) of the Income Tax Act, 1961.

The relevant provision, section 245D(4A) of the Act, mandates that the Settlement Commission must pass an order within eighteen months from the end of the month in which the application was made. The period for passing orders was set to expire on 31st May and 30th June. The High Court's judgment and order dated 4.2.2019 set aside previous orders and restored the matters to the Settlement Commission. During the period between 2.2.2018 and four weeks after 4.2.2019, when the applications were not pending before the Settlement Commission, this time should not be considered while calculating the 18-month period. The High Court held that this period should be excluded from the computation of the time limit under section 245D(4A) of the Act.

Consequently, the petitions were allowed, and it was determined that the period from 2.2.2018 to four weeks after 4.2.2019 would be excluded when calculating the 18-month period for passing orders under section 245D(4) of the Income Tax Act, 1961. The Settlement Commission was advised to expedite the decision-making process and not wait for the full 18 months to pass. The rule was made absolute in each petition, with no order as to costs.