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TMI Blog2023 (11) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... date as prescribed by the legislation. Accordingly, when it has extended the last date from 01.02.2021 to 30.09.2021, it can only extend the deadline but cannot introduce a new concept of eligibility as on 01.02.2021 which is not there in the Act itself. Writ of declaration, declaring the amendment to the Income Tax Act in Section 245-A by inserting Sub-Clause (da), (ea) and (eb), 245B, 245BC,245BD, proviso to 245C, 245D, 245DD, 245F, 245G, 245H and insertion of new Section 245AA and 245M by way of Sections 54 to 65, Finance Act, 2021 with retrospective effect from 01.02.2021 as arbitrary, illegal and void and infringing the fundamental rights conferred under Article 14,19(i)(g), 20, 20 (2) and 21 of the Constitution of India, 1950, thus unenforceable and unconstitutional - Scope of circular 28.09.2021 in as much as it restricted the filing of the application before the Interim Board for Settlement only by the assesses who were eligible to file the application for settlement on 31.01.2021. According to the petitioners, they are eligible and their cases are complex in nature and it would be uncertain to pursue the regular remedies and it would be beneficial for them to settle the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made under the Section on or after the first day of February, 2021. The right to file application before ITSC is very much existent and has been exercised till 31.03.2021. The retrospective legislation by way of legal fiction attempts to make it as if it is unavailable. When we consider the instant case, the purpose of the retrospective legislation is to make the ITSC inoperative right from the date of the introduction of the Bill and to send all the pending applications to the Interim Board. Therefore, fixing the last date for filing the applications alone travels beyond the purpose and results in more retrospectivity than which is needed and thus, runs counter to the other parts of the Act . As a matter of fact, as per the principle of lex prospicit non respicit (law looks forward not back) it can be seen that the purport of the legislation is only to do away with the policy of resolution through ITSC. As a matter of fact, the Central Government has to make a Scheme for the purposes of Settlement in respect of pending applications by the Interim Board as per Section 245D(11) and such scheme had to be placed before the Parliament. Thus, neither there is any intent nor it is wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - W.P.Nos.4928, 4935, 5252, 5255 of 2022; W.P.Nos.23856, 23867, 23874, 24537, 25550, 25854, 25859, 26004, 26007 27528 of 2023 And WMP.Nos.14329, 14330, 14331, 14425, 14426, 14427, 15321,15323, 15325, 16296, 16297, 16302, 22869, 22876, 22878, 25483, 25486, 25489 of 2021; WMP.Nos.5076, 5077, 5080, 5081, 5343,5344,5349, 5350 of 2022; WMP.Nos.23370, 23371, 23378, 23379, 23383, 23384, 23954, 23956, 24939, 24940, 25859, 25297, 25301,25304, 26007, 25426, 25431, 25436, 26968, and 26969 of 2023 Hon'ble Mr. Sanjay V. Gangapurwala, Chief Justice And Hon'ble Mr.Justice D.Bharatha Chakravarthy For the Petitioner(s) : Mr. J.D. Mistry, Senior Counsel, Assisted by Mr. R. Sivaraman M/s.Vandana Vyas (in W.P.No.13445 of 2023) For the Petitioner(s) : Mr. R. Sivaraman, Assisted by M/s.Vandana Vyas (for rest of the W.P's) For the Respondent (in all cases) : Mr. A.R.L. Sundaresan, Additional Solicitor General of India. Assisted by Mr. Rajesh Vivekanathan, Deputy Solicitor General of India. (for R1), Mr. A.P. Srinivas, Senior Standing Counsel. and Mr. ANR. Jayaprathap, Junior Standing Counsel. (for R2 R4) COMMON ORDER MR. JUSTICE. D.BHARATHA CHAKRAVARTHY All these writ petitions are connecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or after the first day of February, 2021, which reads thus:- (5). No application shall be made under this section on or after the 1st day of February 2021. 5. The Finance Act, 2021, was made retrospective in operation with effect from 01.02.2021. The reason which was mentioned for the said cut-off date is that the Bill was introduced in the Parliament on the said date. However, as per the existing provisions, in the month of February and March, 2021, in respect of their cases the petitioners had made applications before the ITSC . 6. Be that as it may, considering the difficulty of the assessees, on account of the sudden and retrospective amendment, in exercise of its powers under Section 119(2) of the Act , a press release was issued on 07.09.2021 and thereafter an Order in the nature of a Trade Circular was issued on 28.09.2021 extending the time limit for filing applications before the Interim Board upto 30.09.2021. However, paragraph (4) of the said Order reads thus:- 4. The above relaxation is available to the applications filed:- (i) by the assessees who were eligible to file application for settlement on 31.01.2021 for the assessment years for which the application is soug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to abolish the ITSC and therefore, the Interim Board is constituted only to deal with applications pending as of 01.02.2023. Beyond the said point, nobody can have any right. The right to file an application before the ITSC would itself arise only if proceedings were pending as of 31.01.2023 and if the proceedings were initiated after the cut-off date, there was no question of approaching ITSC . In that view of the matter, while extending the time limit, which was again a concession only to mitigate the hardship, due care was taken and the extension of last date was made conditional upon their right being crystallised as on 31.01.2023 as the intention was only to extend the last date not the operation of the provisions of ITSC beyond the date of its abolition. 10. We have heard the Learned Counsel Appearing on behalf of the Petitioners. Mr. J.D.Mistry , the Learned Senior Counsel led the arguments on behalf of the petitioners in detail, while the other Learned Counsel adopted and supplemented to his submissions. Mr. A.R.L. Sundaresan , the Learned Additional Solicitor General of India, argued on behalf of the respondents. 11. Mr.J.D. Mistry , the Learned Senior Counsel after takin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns upto 30.09.2021, ought not to have introduced a new condition of eligibility and to the said extent, the circular has to be read down as discriminatory and violative of the Act . 15. In support of his submissions, the Learned Senior relied upon the Judgment of the Bombay High Court in, Tata Iron and Steel Co. Ltd -Vs- N.C. Upadhyay [(1974 (96) ITR 1)] , more specifically on paragraph 23 which reads as follows:- 23. . While so holding, we must, however, strike a note of caution that the binding nature of the circular issued by the central board of revenue must be confined to tax laws and that also for the purpose of giving administrative relief to the taxpayer and not for the purpose of imposing a burden on him. . 16. The Judgment of the Supreme Court of India in, Reliance Jute Industries Ltd -Vs- Commissioner of Income Tax [1979 2 TAXMAN 417 SC] , was relied upon, referring to paragraph 6 to contend that it is a cardinal principle of the tax law that the law to be applied is that which is in force for the assessment year unless otherwise provided expressly or by necessary implication. The assessees had a vested right to approach ITSC as per the law in force for the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant portion of paragraph 14 relied upon is extracted hereunder ready reference:- 14. A right which had accrued and had become vested, continued to be capable of being enforced, notwithstanding the repeal of the statute under which the right accrued unless the repealing statute took away the right expressly or by necessary implication. This is the effect of Section 6 of the General Class Act, 1897. 20. The Learned Senior Counsel further relied upon the Judgment of the Supreme Court of India in, Punjab State Cooperative Agriculture Development Bank Limited -Vs- The Registrar of Cooperative Society and others (Civil Appeal Nos. 297-298 of 2022, dated 11.01.2022) , and the relevant paragraph 47 reads as under :- 47. The exposition of legal principles culled out is that an amendment having retrospective operation, which has the effect of taking away the benefit already available to the employee under the existing rule, indeed divest the employee from his vested or accrued rights and that being so, it would be held to be violative of the rights guaranteed under Article 14 and 16 of the Constitution 21. The Judgment in, Union of India Others -Vs- Tushar Ranjan Mohanty and others [1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dgment of the Supreme Court of India in the case of D.S. Nakra -Vs- Union of India [1983 AIR SC 130] , to contend that the cut-off date discriminates between the class of homogeneous persons. The classification if it is made on the cut-off date of 01.02.2021, would only be artificial and the pending applications will have to be read as not pending and as such, the classification is capricious, whimsical and thus violative of Article 14 of the Constitution of India. Relevant portion of paragraph 42 of D.S. Nakara , is extracted hereunder :- 42. If it appears to be undisputable, as it does to us that the pensioners for the purpose of pension benefits form a class, would its upward revision permit a homogeneous class to be divided by arbitrarily, fixing an eligibility criteria unrelated to purpose of revision, and would such classification be founded on some rational principle? The classification has to be based, as is well settled, on some rational principle, and the rational principle must have nexus to the objects sought to be achieved. 25. On behalf of the petitioners, the decision of the Learned Single Judge of the Calcutta High Court in W.P.A.No.3048 of 2022, along with the Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot be declared unconstitutional lightly. The court must be able to hold beyond any iota of doubt that the violation of the constitutional provisions was so glaring that the legislative provision under challenge cannot stand. Sans flagrant violation of the constitutional provisions, the law made by Parliament or a State Legislature is not declared bad 17. This Court has repeatedly stated that legislative enactment can be struck down by Court only on two grounds, namely (i), that the appropriate Legislature does not have competency to make the law and(ii), that it does not take away or abridge any of the fundamental rights enumerated in Part - III of the Constitution or any other constitutional provisions.. 32. While dealing with constitutional validity of a taxation law enacted by Parliament or State Legislature, the court must have regard to the following principles: (i), there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature. (ii), no enactment can be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found. (iii), the court is not concerned with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.R.L.Sundaresan , the Learned Additional Solicitor General of India would submit that even assuming that there was a right to approach ITSC , the parliament which conferred the right has the power to take away the same. Reference was made to the Judgment in, Commercial Tax Officer -Vs- Viswanathan Junjunwala and others [1996 5 SCC 626] , whereby the amendment by which the suo moto power of the Assessing Authority was taken away was held to be valid. Further reliance was made to R.C. Tobacco Pvt. Ltd. -Vs- Union of India [2005 7 SCC 725] , to contend that not only there is power to amend, repeal or supersede, such powers can be exercised retrospectively also. The exercise cannot be unreasonable because the restrospectivity was only 2 months and no unforeseen financial burden arises on account of such amendment. Paragraphs 20, 21, 22, 28 and 29 were referred to. The necessary passages are extracted below:- 20. The competence of parliament and the State legislatures to repeal, amend or supersede an exemption notification is unquestionable. The power to do so retrospectively cannot be and is also not doubted. 21. A law cannot be held to be unreasonable, merely because it operates ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submit that all these Writ Petitions may be dismissed. 34. We have considered the rival submissions made on either side and perused the material records of the cases. The following three questions arise for consideration in the present cases :- (i) Whether or not paragraph No.4(i) of the Circular, dated 28.09.2021 is bad in law inasmuch as it imposes a condition of eligibility to file application for settlement as on 31.01.2021 ? (ii) Whether or not the Finance Act, 2021 is unconstitutional inasmuch as it has given retrospective application with effect from 01.02.2021? (iii) To what reliefs, the petitioners are entitled ? Question No.i : 35. The impugned circular is issued in the exercise of power under Section 119(2) of the Act . The offending clause 4(i) is extracted supra in paragraph No.6 above. On a consideration of the decisions relied on by both sides and submissions made, to answer the question in the present context of the case, it is clear that a circular issued by the respondents under Section 119 of the Act : (i) would be binding on the departmental authorities; (ii) It is issued to ensure uniform and proper administration and the application of the Income Tax Act; (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C can be exercised so long as the ITSC is operational in law. When ITSC itself has been made inoperative with effect from 01.02.2021, it cannot be said that clause 4(i) of the circular runs counter or imposes an additional condition to the statute. Accordingly, Question No.i is answered. Question No.ii : 37. The basic ground of attack on the constitutionality of the impugned enactment is that it is retrospective in nature and that it takes away the vested rights of the petitioners. The further submission is that the vested rights are taken away by fixing an artificial cut-off date. In this regard, the contention on behalf of the State is that the settlement itself is concession and therefore, the writ petitioners cannot claim any vested right. We are unable to countenance the said argument on behalf of the State. It may be true that the orders passed by ITSC containing terms of settlement has the trappings of concession and benevolence showered by the State to a particular assessee. But, such benevolence, concession etc., are exercised by the State through a statutory regime. Under the statute, the assessees are entitled to approach the appropriate authority seeking such concession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to abolish the ITSC and to establish an Interim Board to deal with the pending applications. It can be seen that in respect of the case of the petitioners whose matters had arisen before the notification of the Act on 01.04.2021, but, after the cut-off date of 01.02.2021, were also very much eligible to approach the ITSC . The decisions relied upon by both sides in respect of retrospective legislation referred to supra, unequivocally hold that if the retrospective legislation takes away a vested right, it must do so by providing expressly or by necessary intendment. We step back and read the Amending Act namely, the Finance Act, 2021 carefully. While the ITSC is made inoperative with effect from 01.02.2021 and an Interim Board is set up, provisions are made to transfer pending applications, absolutely, the Amending Act or the entire Chapter XIX-A as it stands after the amendment, does not expressly deal with or provide anything by necessary intendment regarding those applications which are made or the eligible cases in the interregnum. This being so, the ratio of the Judgment of the Hon'ble Supreme Court of India, in Commissioner of Income Tax -Vs- Shah Sadiq Sons (cited supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at purposes and between what persons the statutory fiction is to be resorted to. This passage was quoted with approval by the House of Lords in Hill v. East West India Dock Co.[(1884) 9 AC 448, 456 : 51 LT 163 : 32 WR 925 (HL)] This principle of statutory interpretation has been accepted by this Court. In Bengal Immunity Co. Ltd. v. State of Bihar[AIR 1955 SC 661 : (1955) 2 SCR 603, 646 : 1955 SCJ 672] it was held that a legal fiction is to be limited to the purpose for which it was created and should not be extended beyond that legitimate field . This was reiterated in CIT v. Amarchand N. Shroff [AIR 1963 SC 1448 : 1963 Supp (1) SCR 699, 709 : (1963) 1 SCJ 411], Maharani Mandalsa Devi v. M. Ramnarain (P) Ltd. [AIR 1965 SC 1718 : (1965) 3 SCR 421, 424 : (1965) 2 SCJ 853] and CIT v. Vadilal Lallubhai [(1973) 3 SCC 17, 22 : 1973 SCC (Tax) 1, 6 : AIR 1973 SC 1016 : (1973) 1 SCR 1058, 1064]. Assuming, therefore, that an application for variation of the conditions of a permit referred to in subsection (8) of Section 57 is to be deemed by a fiction of law to be an application for the grant of a new permit, the question to which we must address ourselves is for what purpose is such an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the following terms :- (i) Section 245C(5) of the Income Tax Act, 1961 (as amended by the Finance Act, 2021) is read down by removing the retrospective last date of 1st date of February, 2021 as 31st day of March, 2021; (ii) Consequently the last date of eligibility mentioned paragraph 4(i) of the impugned circular dated 28.09.2021 shall also be read as 31.03.2021; (iii) all the applications in respect of the petitioners even in respect of the cases arising between 01.02.2021 to 31.03.2021 shall be deemed be pending applications and shall be deemed to be pending applications for the purposes of consideration by the Interim Board; (iv) Wherever they are rejected on the ground that they did not have a case pending as on 31.01.2021, such orders shall stand set aside and the applications shall be deemed to be 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 in accordance with the scheme that may be framed by the Central Government as in respect of the other cases which arose prior to 31.01.2021; (v) No Costs. Consequently all miscellaneous applications shall stand closed. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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