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2024 (7) TMI 507 - HC - Income TaxEligibility of settlement applications under the amended provisions of the Act - Scope of amendment in Section 245C - maintainability of the Settlement Applications filed prior to 31.03.2021 as well as notices issued prior to the said date u/s 148 or 153A of the Act would be maintainable before the Interim Board for Settlement - HELD THAT - Section 245A (b) of the Act defines the word case to mean any proceedings for the assessment under the Act of the any person in respect of any Assessment Year or Assessment Years, which may be pending before the Assessing Officer on the date on which application is made under Section 245C (1) of the Act. It is pertinent to note that when the Finance Bill came into force and became the law with effect from 01.04.2021, provisions of Section 245C (5) of the Act, which provides that no application shall be made under this Section on or after 01.02.2021 cannot obliviate, the applications already filed by the petitioners as on the date of filing of the application for settlement, amendment of Section 245C (5) of the Act was not a statute and therefore by retrospective amendment the petitioners cannot be prohibited from making an application because if the legislature intended to make applications filed between 01.02.2021 and 01.04.201 as invalid and bad in law, it would have instead provided that such application would be treated as null and void. Therefore the provisions of Section 245C (5) of the Act cannot be placed into service to invalidate the applications filed between 01.02.2021 and 31.03.2021. When the petitioners have filed their applications before 31.03.12021, the date on which amendment Finance Act, 2021 did not come into effect and therefore the petitioners had vested right of preferring the application in absence of any statute prohibiting the same application. It is also pertinent to note that the CBDT has extended the last date from 01.02.2021 to 30.09.2021 for filing applications for settlement eligible on 31.01.2021 and the CBDT could not have prescribed the eligible date of filing of application up to 01.02.2021 for the assessee relying upon provisions of Section 245C (5) of the Act which was not in existence up to 31.03.2021 and therefore the application for settlement made by the petitioners are valid applications filed prior to 31.03.2021 in absence of provisions of Section 245C (5) of the Act. Therefore an application already filed after 01.02.2021 but before 31.03.2021 cannot be declared invalid and provision of section 245C (5) has rightly been read down that no application shall be made after 01.04.2021 once the provision of Section 245C (5) received the assent of the Hon ble President of India on 01.04.2021, however before the assent being accorded to the Finance Act, 2021 the applications made by the petitioners cannot be held to be invalid by virtue of subsection 5 of Section 245C of the Act. The petitions succeed and are accordingly allowed. The applications filed by the petitioners in respect of the cases arising between 01.02.2021 to 31.03.2021 shall be deemed to be the pending applications and shall be applications for the purpose of consideration by the Interim Board considering the last date of eligibility mentioned in para No. 4 (1) of the Notification dated 28.09.2021 shall be read as 31.03.2021 by reading down the last date 01.02.2021 as 31.03.2021 in Section 245C (5) of the Act as amended by the Finance Act, 2021. The impugned orders of the Interim Board are therefore set aside and the applications filed by the petitioners shall be deemed to be the pending applications for the consideration by the Interim Board, if otherwise, in order and eligible and shall be dealt with in accordance with law on merits and in accordance with the scheme that maybe framed by the Central Government as in respect of the other cases which were pending as on 31.01.2021. Consequential actions to the impugned orders passed by the Interim Board if any taken by the respondent Assessing Officer shall also stand quashed and set aside and the matter is remanded back to the Interim Board for Settlement for deciding the applications filed by the petitioners on merits.
Issues Involved:
1. Validity of notice under Section 148 of the Income Tax Act, 1961. 2. Validity of the order under Section 245D(4) of the Income Tax Act, 1961. 3. Eligibility to file an application for settlement under the amended Section 245C of the Income Tax Act, 1961. 4. Interpretation of the amendment's effective date and its retrospective application. Detailed Analysis: 1. Validity of Notice under Section 148 of the Income Tax Act, 1961: The petitioners challenged the notices issued under Section 148 of the Income Tax Act, 1961, arguing that these notices were issued after the cut-off date of 31.01.2021, which made them ineligible for settlement applications under the amended provisions of the Act. The court examined the dates of the notices and the corresponding assessment years, concluding that the notices issued after 31.01.2021 did not meet the eligibility criteria set by the respondents. 2. Validity of the Order under Section 245D(4) of the Income Tax Act, 1961: The petitioners sought to quash the orders passed by the Interim Board of Settlement under Section 245D(4) of the Act. The court found that the Interim Board had held the petitioners ineligible based on the interpretation that applications must be filed on or before 31.01.2021. The court referred to the decisions of the Hon’ble Madras High Court and the Hon’ble Bombay High Court, which had read down the cut-off date to 31.03.2021, thereby invalidating the orders of the Interim Board. 3. Eligibility to File an Application for Settlement under the Amended Section 245C of the Income Tax Act, 1961: The core issue was the eligibility to file settlement applications under the amended Section 245C of the Act. The petitioners argued that they were eligible to file applications until 31.03.2021, as the Finance Act, 2021, received the President’s assent on 01.04.2021. The court agreed, citing the Hon’ble Madras High Court’s decision that the eligibility date should be read as 31.03.2021, not 01.02.2021. The court emphasized that the Finance Bill did not have the force of law until it was enacted, and the petitioners had a vested right to file applications before 31.03.2021. 4. Interpretation of the Amendment's Effective Date and Its Retrospective Application: The respondents argued that the Finance Act, 2021, made the Settlement Commission inoperative from 01.02.2021, and any applications filed after this date were invalid. The court disagreed, stating that retrospective legislation must explicitly or by necessary implication take away vested rights. The court found that the Finance Act, 2021, did not expressly invalidate applications filed between 01.02.2021 and 31.03.2021. The court held that the retrospective application of the amendment could not nullify the petitioners' right to file settlement applications during this period. Conclusion: The court concluded that the petitioners’ applications for settlement, filed between 01.02.2021 and 31.03.2021, were valid and should be considered pending applications by the Interim Board. The court set aside the impugned orders of the Interim Board and remanded the cases back for consideration on merits. The court also quashed any consequential actions taken by the respondent Assessing Officer based on the invalid orders. The court adopted the reasoning of the Hon’ble Madras High Court, ensuring that the applications filed before the Finance Act, 2021, came into effect were deemed valid. Order: The petitions were allowed, the impugned orders were set aside, and the applications were remanded to the Interim Board for consideration on merits. The court directed that the eligibility date in the notification should be read as 31.03.2021. No costs were awarded.
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