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TMI Blog2018 (12) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... l grounds nor on the legal grounds. As per section 245A the 'case' is admitted to the Settlement Commission when the proceedings are pending before the Assessing Officer and the assessment proceedings gets initiated only by issue of Section 143(2) which is a sine-qua-non for filing of application before the ITAT. Thus at this juncture revisiting the issue of notice under section 143(2) issued in the year 1996 after a period of 12 years would be an infructuous exercise as the settlement application would be accepted only if the assessment proceedings are pending and fact that the application has been allowed by the order of the ITSC under section 245D(1). Since the assessment order passed by the Assessing Officer is as a consequent to the order passed by the ITSC under section 245HA(2) the C.O of the assessee is liable to be dismissed. - ITA Nos. 1271 to 1274/Chd/2017, Cross Object ion Nos. 66 to 69 /Chd/2017, ITA Nos. 1287 to 1291/Chd/2017, Cross Object ion Nos. 58 to 62 /Chd/2017, ITA Nos. 1292 to 1296/Chd/2017 And Cross Objection Nos. 5 to 9 /Chd/2017 - - - Dated:- 29-8-2018 - SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B. R. R. KUMAR, ACCOUNTANT MEMBER For The Assessee : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeded with, directs the applicant to pay, within 35 days of receipt of a copy of the order, the additional amount of receipt income tax payable on the income disclosed in the application and to furnish proof of such payment to the Commission and the A.O. having jurisdiction, within fifteen days of such payment. If an assessee is unable to pay the additional amount of Income-tax for good and sufficient reasons, he may apply to the Commission for allowing payment of such income-tax in instalments and the Commission may extend the time for payment or grant suitable instalments subject to the assessee furnishing adequate security. In any case, if payment of the additional tax is delayed beyond 35 days of the date of receipt by the applicant, a copy of the order of the Commission allowing the application to be proceeded with, the assessee shall be required to pay interest on such delayed payment as prescribed under section 245D(2C). In case of default on the part of the applicant, the assessing officer may be directed by the Commission to recover the remaining unpaid amount together with interest payable thereon under sub-section 2(C) of section 245D of Income-tax Act, 1961, and with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted a reply contending that the proceedings have become time-barred. The Ld. AO has given the reasons for completion of the assessment at para 6.1(ii) and as can be deciphered at para 6.1 of page 10 of the order of the CIT(A) and completed the assessment under section 143(3) of the Income Tax Act, 1961. 5. During the proceeding before the Ld. CIT(A) the Ld. AR filed written submissions and relied on the same during the arguments taken before us. The relevant extract is as under:- Re: Assessment order being barred by limitation. 1. That the Assessee filed applications before the ITSC, Delhi Bench for two assessment years i.e. A.Y. 1996-97 and A.Y. 97-98 on 15.03.1999 and on 14.02.2001 filed applications before the TTSC Delhi Bench for three assessment years i.e. A. Y. 1998-99 to 2000-01. 2. The applications filed before ITSC Delhi Bench involving above mentioned assessment years has been admitted by the ITSC Delhi Bench U/s 245D(1) of the IT Act. Refer Chart. 3. By Finance Act, 2007, new provision 245D(2D) was inserted w.e.f 01.06.2007. The Assessee approached the Hon'ble High Court of Punjab and Haryana challenging the aforesaid new provision. On 21.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and without considering the submission made by the Assessee passed the Assessment order dated22.06.2016 u/s 143(3) of the IT Act. 11. That the impugned assessment orders dated 22.06.2016 are barred by time limitation as the proceedings before TTSC stands abated in 31.07.2007. Hence, the impugned assessment orders are liable to be quashed. 12. Section 245D(2D) inserted by way of Finance Act, 2007 w.e.f. 1.6.2007, reads as under: Where an application was made under sub-section (1) of section 245C before the 1st day of June, 2007 and an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st day of June, 2007, but an order under the provisions of subsection (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase may be, shall, after the exclusion of the period under sub-section (4) of section 245HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year; and for the purposes of determining the period of limitation under sections 149, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under section 243 or section 244 or, as the case may be, section 244A, this proviso shall also apply accordingly. 17. Section 245D(2D)as extracted above has been inserted by Finance Act, 2007. Ths claus deal with the applications where the action under section 245D(1) on the application moved under section 245C(1) was already taken. This clause contemplates that taxes alongwith additional taxes on the income disclosed in the application should be paid by 31.07.2007. In case an assessee fails to make payment, then the application will be deemed to have been abated. 18. There is no dispute to the fact that no tax has been paid on or before 31st day of July, 2007 and therefore, the application was not to be allowed to be further proceeded with and therefore, the proceedings before the ITSC hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the AO get revived on 01.08.2007. Therefore, the AO was required to pass the assessment order by 31.07.2008, which in fact has been passed on 22.06.2016 and therefore, the assessment order passed by the AO is barred by limitation. Therefore, the assessment so made is bad in law. 6. The scanned image of chart showing sequence of events from the date of filing of application, passing through various writs and completion of the assessment order is as under: Sr. No. Particulars AY 1994-95 AY 1995-96 AY 1996-97 AY 1997-98 1. Return filed 27.03.1995 27.03.1996 29.08.1996 25.03.1998 2. Date of issue of Notice u/s 143(2). Not issued Not issued Not issued Not issued 3. Date of service of Notice u/s 143(2). Not served Not served Not served Not served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date of filing second Writ (CWP No. 17937 of 2014) challenging the order of FTSC u/s 245D(4) dated 28.02.2014 before the Hon'ble High Court. 02.09.2014 02.09.2014 02.09.2014 02.09.2014 12. Date of order of the Hon'ble High Court in second writ. 24.04.2015 Setting aside Order u/s 245D(4) dated 28.02.2014. 24.04.2015 Setting aside Order u/s 245D(4) dated 28.02.2014. 24.04.2015 Setting aside Order u/s 245D(4) dated 28.02.2014. 24.04.2015 Setting aside Order u/s 245D(4) dated 28.02.2014. 13. Date of intimation of Abatement of proceedings before ITSC u/s 245HA(1) r.ws 245D(2D) 25.04.2016 25.04.2016 25.04.2016 25.04.2016 14. Date of Notice u/s 142(l) along with questionnaire of even date. 10.06.2016 10.06.2016 10.06.2016 10.06.2016 15. Date of Letter of AO along with fresh questionna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application of the assessee by a speaking order and intimation was sent to the Assessing Officer under section on 25/04/2016 and the same was received by the PCIT on 02/05/2016 and since the assessment was completed on 22/06/2014, the order passed was well within the due time allowed by the Act. 9.1 The Ld. DR further argued that the proceedings before the Settlement Commission were concluded only on 25/04/2016 against the application filed by the assessee on 15/03/1999 / 14/02/2001 (the dates of filing of applications before the ITSC mildly vary from assessee to assessee). Since the proceedings concluded on 25/04/2016 abating the proceedings, the Assessing Officer was correct in passing the assessment order. 10. The Ld. AR vehemently argued that the case has been time barred based on the amendment made in the Section 275HA (1)(ii) r.w. explanation (b) being a specific date i.e; 31/07/2007 and therefore the assessee is covered under section 245HA(1)(ii) and therefore the proceedings before ITSC shall abate on the specified date as referred in the Explanation (b) i.e. 31st day of July, 2007 and the proceedings before the AO get revived on 01.08.2007. Therefore, the AO was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional tax is delayed beyond 35 days of the date of receipt by the applicant, a copy of the order of the Commission allowing the application to be proceeded with, the assessee shall be required to pay interest on such delayed payment as prescribed under section 245D(2C). In case of default on the part of the applicant, the assessing officer may be directed by the Commission to recover the remaining unpaid amount together with interest payable thereon under sub-section 2(C) of section 245D of Income-tax Act, 1961, and with any penalty imposed in accordance with the provisions of section 245D(2D) and under Chapter XVII of the Income-tax Act, 1961. 12.1 The amended provisions of section 245D are as under: 64. In section 245D of the Income-tax Act,- (i) for sub-section (1), the following sub-section shall be substituted with effect from the 1st day of June, 2007, namely:- (1) On receipt of an application under section 245C, the Settlement Commission shall, within seven days from the date of receipt of the application, issue a notice to the applicant requiring him to explain as to why the application made by him be allowed to be proceeded with, and on hearing the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant of being heard: Provided further that where the Commissioner has not furnished the report within the aforesaid period, the Settlement Commission shall proceed further in the matter without the report of the Commissioner. (2D) Where an application was made under sub-section (1) of section 245C before the 1st day of June, 2007 and an order under the provisions of sub-section (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st day of June, 2007, but an order under the provisions of sub-section (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st day of June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007. ; (iii) for sub-sections (3), (4) and (4A), the following sub-sections shall be substituted with effect from the 1st day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th effect from the 1st day of April, 2008. 13. At the outset it is to be mentioned here that the Assessee, pending the disposal of the application by the ITSC has filed writ petition on 06/01/2008 challenging the validity of the amendments of section 245D(2D) made by the Finance Act, 2007 before the Hon'ble High Court of Punjab and Haryana. The ITSC has already passed an order under section 245D(1) on 14/10/1999 (and 05/10/2001 as applicable) by issuing a notice requiring to explain as to why the application made by him be allowed to be proceeded with. Since the matter of legal validity of the amendment to 245D(2D) of the Act has been subject matter of litigation before the Hon'ble High Court the ITSC could not have completed the proceedings nor passed any order rejecting the application of the assessee owing to nonpayment of the tax. The core subject matter of payment of the tax and interest as amended by the Finance Act, 2007 was before the Hon'ble Court and is sub judice owing to the writ petition filed by the assessee. 14. The Hon'ble High Court while disposing the bunch of applications, vide order dt. 21/09/2012 on the issue of constitutional validity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Article 14 of the Constitution. HELD, upholding the challenge: (i) Though Article 14 does not prohibit classification, the same has to be reasonable and not arbitrary. The FA 2007 created two classes of applicants - those whose applications were pending as of 1.6.2007 and those who filed thereafter. While the classification was not unreasonable, the choice of 31.3.2008 as the cut-off date was arbitrary irrational. The question whether an application could be disposed of by 31.3.2008 depended on the fortuitous circumstance of the Settlement Commission at its whims and fancies deciding to do so. The said date had no rational relation to the object of expeditious disposal of cases; (ii) S. 245HA (3) which makes available to the AO the hitherto confidential information furnished by the applicant has the effect of severely prejudicing the assessee for no fault of his but solely for the inability of the Settlement Commission to dispose of the application by the specified date. This provision is also arbitrary, unreasonable and violative of Article 14; (iii) S. 278 AB inserted by the FA 2008 to confer power in the Commissioner to grant immunity from penalty and prosecut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was adjourned sine-die. This sine-die adjournment was necessitated as the Hon'ble High Court has explicitly mentioned in the order that the orders of Hon'ble Supreme Court in CWP No. 113 of 2008 titled as Prabhu Dayal v. UOI was being abated. Keeping in view the proceedings before the respectable higher judiciary the ITSC has rightly kept the proceedings in abeyance as the moot issue revolves around the validity of the amendments brought by the Finance Act, 2007 which goes to the root of the issue before them. Hence, the assessee's contention that no stay has been given by the Hon'ble High Court cannot be accepted especially more so when the assessee's application has been dealt by the ITSC against which the assessee again approached the Hon'ble High Court for affording principles of natural justice. On obtaining the order from the Hon'ble High Court of Punjab Haryana, the assessee has diligently represented himself before the ITSC. 15.5 To elaborate, thereafter the ITSC has passed an order in relation to the application filed by the assessee. Thus at this juncture it can be said that the application of the assessee has been considered rightly by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f by the Settlement Commission an order on 28/02/2014 and also represent themselves before the ITSC again for processing and disposal of application for the proceedings concluded on 25/04/2016 is estopped from making assertions or from going back on his word. The assessee has no doubt represented himself before the Hon'ble High Court on constitutional validity of the amendment and further approached the High Court for giving him another opportunity of being heard after the ITSC has passed its order once on 28/02/2014 and again an order was passed on 25/04/2016 taking into cognizance the representation and submissions of the assessee. There was no other new application before the ITSC other than the one filed by the assessee on 30/08/1996 which has gone through two stages of writ petitions and two rounds of ITSC orders. The orders and directions given by the Hon'ble High Courts stands merged legally in the order of the Settlement Commission. The facts make it very clear that it was very same application and the processes thereof have gone through different rounds and stages of judgments by judicial hierarchy. Hence, the assessee's contention that his case got time barred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim: Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003; (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return: Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Section 245HA(2) (2) Where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income-tax aut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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