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TMI Blog2024 (4) TMI 204X X X X Extracts X X X X X X X X Extracts X X X X ..... t the question is whether the notification goes beyond the provisions of the Act. If the notification goes beyond the provisions of the Act, then to that extent, the notification is clearly invalid and liable to be quashed. If, however, it is held that the notification does not impose a further condition de-hors the provisions of the Act, then the date of eligibility in the said notification is required to be read down to save it from being quashed. Therefore, the principles laid down by the Hon ble Apex Court in Shanmugavelu [ 2024 (2) TMI 291 - SUPREME COURT] , in our view, clearly support the case of petitioner. Retrospective legislation cannot affect the vested rights. When the Department has extended the last date from 1st February 2021 to 30th September 2021, it can only extend the deadline but cannot introduce a new concept of eligibility as on 1st February 2021 which is not there in the Act itself. Though the CBDT relaxed the rigours of the provisions of the Act for the benefit of assessees, it is not open to the CBDT to put in new rigours or impediments to the rights of an assessee in a Press Release or a notification which is contrary to the provisions of the Act. Though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a condition in a Press Release dated 7th September 2021 in so far as it seeks to make only those assessees eligible to file application before the Settlement Commission who were eligible as on 31st January 2021 which was challenged in the petition. Subsequently, upon leave being granted, the petition was amended to also impugn a notification dated 28th September 2021 in so far as it sought to make only those assessees eligible to file applications before the Interim Board Settlement Commission ( IBSC ), respondent no. 3, who are eligible as on 31st January 2021. Facts in brief : 4. On 25th July 2019 a search action under Section 132 of the Income Tax Act, 1961 (the Act) was conducted on petitioner and was concluded on 29th August 2019. Thereafter, petitioner received a notice dated 5th February 2021 under Section 153A of the Act for Assessment Years 2014-15 to 2020-21 calling upon petitioner to file return of income within 15 days. On 18th March 2021 petitioner filed before the Settlement Commission an application under Section 245C of the Act for Assessment Years 2014-15 to 2020-21. 5. In the meantime, a Finance Bill, 2021 was laid before the legislature on 1st February 2021. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me due to the amendments by the Finance Act, 2021, the applications for settlement can be filed by such tax payers, on or before 30th September 2021 before the Interim Board. The two conditions, which have been notified as necessary for filing application are (i) the assessees were eligible to file applications for settlement on 31st January 2021 for the assessment year, for which application is sought to be filed; and (ii) the assessment proceedings for the relevant assessment years are pending as on the date of filing applications. This Press Release has been impugned in the petition. 10. Thereafter, respondent no. 1 issued notices dated 30th August 2021 and 13th September 2021 under Section 142(1) of the Act calling for certain information with respect to the assessment proceedings for Assessment Years 2014-15 to 2020-21. In response, petitioner filed submissions dated 2nd September 2021 stating that petitioner has filed, before amendment of the Act, an application before the Settlement Commission on 18th March 2021 which is deemed to have been allowed to be proceeded with in terms of Section 245D(1) of the Act and, therefore, the assessment proceedings be kept in abeyance till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application for settlement on 31st January 2021. 14. Mr. Mistri submitted as under : (a) the Settlement Commission having accepted petitioner s application dated 18th March 2021, in view of proviso to Section 245D(1) of the Act, the said application is deemed to have been proceeded with. No order has been passed by the Settlement Commission and/or respondent no. 2 treating petitioner s application as invalid or dismissing/rejecting petitioner s application. Since petitioner s application is still pending before the Settlement Commission, the finding of respondent no. 1 in the impugned notice to treat such application as not a valid application is bad in law; (b) the statutory remedy of approaching the Interim Board cannot be taken away retrospectively. Retrospective legislation cannot affect the vested rights. When the Department has extended the last date from 1st February 2021 to 30th September 2021, it can only extend the deadline but cannot introduce a new concept of eligibility as on 1st February 2021 which is not there in the Act itself; (c) in petitioner s case the search was conducted between 25th July 2019 and 29th August 2019 but for the reasons best known to them, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Clauses Act. (j) In Punjab State Co-operative Agriculture Development Bank Limited vs. The Registrar of Co-operative Society and Ors. Civil Appeal Nos. 297-298 of 2022 dated 11.01.2022 the Court held 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. (k) As held in Union of India Ors. vs. Tushar Ranjan Mohanty and Ors. 1994 (5) SCC 220, though the legislature has the power to make laws with retrospective effect, that power cannot be used to deprive a person of an accrued right vested in him under a statute or under the Constitution; (l) it was open to respondent no. 3 to relax the rigours of the provisions of the Act for the benefit of assessees by issuing any direction or Press Release but it is not open to respondent no. 3 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application made by an assessee will not be hit by sub-section (5) of Section 245C of the Act. 15. Mr. Suresh Kumar submitted as under : (a) The very purpose of the Finance Act, 2021 impugned legislation itself is to do away with the Settlement Commission and to set up an Interim Board to deal with the pending applications. The Finance Act received the assent of the Hon ble President of India on 28th March 2021 and was published in the gazette and notified on 1st April 2021. It was expressly given retrospective effect from 1st February 2021. Petitioner does not have any vested right for settlement and the settlement itself is a concession; (b) the very concept of settlement is only for the benefit of Revenue to ease and expedite the collection; (c) the Circular merely extended the time for submitting the applications and nothing beyond. As per the Act itself, petitioners were eligible to file applications only if their case was pending as on 1st February 2021 and the pending applications ought to be transferred to the Interim Board. Therefore, it is clear that only the applications which are eligible and filed before 1st February 2021 alone have to be dealt with by the Interim Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chievable. A Single Judge of the Hon ble Calcutta High Court in Pradeep Kumar Naredi vs. Union of India (2022) 138 taxmann.com 378 (Calcutta) had rejected the petition challenging the very same Press Release and the CBDT order dated 28th September 2021. FINDINGS : 16. At the outset, the question of the validity of the applications filed before the Settlement Commission by various assessees similarly placed as petitioner has been decided by the Hon ble Madras High Court in Jain Metal Rolling Mills vs. UOI 156 taxmann.com 513 wherein the Hon ble High Court has held that the eligibility condition in the impugned Notification issued under Section 119(2) of the Act should be read as 31st March 2021 and not 31st January 2021 as the Finance Act, 2021 was notified, w.e.f. 1st April 2021, and, therefore, the eligibility of an assessee is to be considered from the immediately preceding date. In view of the decision of the Madras High Court, the impugned notice/order dated 16th September 2021, passed by respondent no. 1 holding petitioner s application as invalid and bad in law is clearly not sustainable as the decision of the Hon ble Madras High Court, reading down the eligibility condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided: ************************* (2) ******************* 3) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. (4) An assessee shall, on the date on which he makes an application under sub-section (1) to the Settlement Commission, also intimate the Assessing Officer in the prescribed manner of having made such application to the said Commission. (5) No application shall be made under this section on or after the 1st day of February, 2021. Procedure on receipt of an application under section 245C. 245D. (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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Commissioner or Commissioner. (4A) The Settlement Commission shall pass an order under sub-section (4), (i) in respect of an application referred to in sub-section (2A) or sub-section (2D), on or before the 31st day of March, 2008; (ii) in respect of an application made on or after the 1st day of June, 2007 but before the 1st day of June, 2010, within twelve months from the end of the month in which the application was made; (iii) in respect of an application made on or after the 1st day of June, 2010, within eighteen months from the end of the month in which the application was made. ****************** [(9) On and from the 1st day of February, 2021, the provisions of sub-sections (1), (2), (2B), (2C), (3), (4), (4A), (5), (6) and (6B) shall apply to pending applications allotted to Interim Board with the following modifications, namely: (i) for the words Settlement Commission , wherever they occur, the words Interim Board shall be substituted; (ii) for the word Bench , the words Interim Board shall be substituted; (iii) for the purposes of this section, the date referred to in sub-section (2) of section 245M shall be deemed to be date on which the application was made under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-21 fell within the meaning of case and petitioner had made a valid application as per Section 245C(1) of the Act. On 18th March 2021, there was no prohibition on petitioner to make such an application. 19. The fact that the Finance Bill, 2021 had been presented before parliament proposing to insert sub-section (5) to Section 245C of the Act, which was to provide that no application shall be made under this section on or after the 1st February 2021 , could not bar petitioner from making the application on 18th March, 2021. On 18th March, 2021 the Finance Bill, 2021 did not have the force of law and was merely a Bill which may or may not be enacted or which may be enacted in a different form. Undisputably, the Finance Bill, 2021 till the same was enacted, did not become law. Admittedly, the Finance Act, 2021 was notified with effect from 1st of April, 2021, before which petitioner had already filed a valid application which has also been accepted by the Settlement Commission. 20. The amendments made by the Finance Act, 2021, despite being retrospective in nature by their insertion being with effect from 1st February 2021, would not affect the vested right of petitioner to have the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee would be entitled to set off of the earlier speculation loss against the profits even after the 1961 Act. In our view, Shah Sadiq Sons (Supra) supports the view that a right which had accrued to approach the Settlement Commission till the notification of the Finance Act, 2021 on 1st April 2021 stood vested in the eligible assessees and the said rights continued to be capable of being enforced not with standing the amendment of the relevant provisions. In the present case also, assessee (petitioner) having filed a valid application, has a vested right to be entitled to the process of settlement for determination of income of petitioner for the years of which such application has been made. Therefore, the amendment in Chapter XIX would not render the application of petitioner invalid or bad in law. Further it is not the case of petitioner that petitioner has a vested right to be adjudicated by the Settlement Commission as per the erstwhile provisions. Petitioner s case is that as the application of petitioner has been validly filed, petitioner has a vested right to the extent that petitioner s application being treated as a valid and pending application, which should be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the decision relied on by Mr. Suresh Kumar will have no application on the facts of the present case and the enunciation of law supports the case of petitioner. 23. The contention on behalf of State that the settlement itself is concession and therefore, petitioner cannot claim any vested right [as held in Jain Metal Rolling Mills (Supra)] cannot be accepted. The orders passed by IBSC or the Settlement Commission may have the trappings of a concession, but the same is exercised by the State through a statutory regime, with the assessees being entitled to approach the authority seeking such a concession. The assessees have a statutory right to approach the Settlement Commission. Therefore, in our view, though the State had the power to bring amendment with retrospective effect, it cannot take away vested right, unless the statute expressly or by necessary intendment took away the right. 24. As regards the notification dated 28th September 2021 issued by the CBDT under Section 192(2)(b) of the Act, the date for making application has been extended by the said notification to 30th September 2021, which is clearly within the scope of the powers of the CBDT under Section 119 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it provides that only those assessees, who are eligible to file applications on 31st January 2021 can make an application up to 30th September, 2021 is invalid and bad in law. 26. Sections 245AA, 245D (9) and 245M (2) of the Act as amended by the Finance Act, 2021 make it clear that all pending applications shall be settled by the Interim Board. 27. The eligibility of petitioner was dependent upon the notice being issued by respondent no. 1 under Section 153A of the Act. Respondent no. 1 is not entitled to take benefit of his own delay in issuing the notice to the assessee so as to take away the right of petitioner to file an application under Section 245C. The search in petitioner s case took place on 25th July 2019 and ended on 29th August 2019. Thereafter, respondent no. 1 delayed issuing the notice under Section 153A of the Act for a period of almost 18 months. Respondent no. 1 issued notice under Section 153A only on 5th February 2021. Hence, as respondent no. 1 has delayed issuing the notice under Section 153A of the Act which entitled petitioner to approach the Settlement Commission, such right of petitioner to approach the Settlement Commission cannot be taken away by resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was inter alia a change in the rate of duty from the rate as provided in the Finance Bill. Hence, the issue before the Hon ble Apex Court was with respect to the validity of the collection of the additional duty, in the period between the date of the Finance Bill and the promulgation of the Finance Act and whether the assessees would be liable to pay such additional duty. Therefore, the argument of Mr. Suresh Kumar in the present case that the Finance Bill, 2021 would take effect from the date of the Finance Bill, i.e., 1st February 2021, relying on the decision of the Hon ble Apex Court is not justified. In the present case, the issue is with respect to the provisions of the Income Tax Act and, the effect of the Provisional Collection of Tax does not arise. Further, the questions before the Hon ble Supreme Court were - (a) legislative competence under Entry 84 of the Union list to impose an excise duty retrospectively in the facts of the case; (b) contravention of Articles 19(1)(f), 31(1) 31(2) of the Constitution of India; and (c) Rule 10(a) re: recovery of duty. None of the issues arise in the instant case. Hence, this decision has no bearing on the department s contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in any case, Section 245C(5) of the Act purports to stop/deem as never having taken place the act of petitioner of filing an application, from retrospective date, when petitioner has already performed the act, (i.e., filed the application on 18th March, 2021 before the statute was amended). Hence, the literal interpretation of Section 245C (5) of the Act leads to the provision being rendered arbitrary and unreasonable and, hence, violative of Article 14 of the Constitution of India. Hence, the provision of Section 245C(5) of the Act is required to be made applicable only with effect from the notification of the Finance Act, 2021, i.e., 1st of April 2021. 32. When the Board itself feels that the date as prescribed in Section 245C(5) of the Act is required to be extended, there is no doubt that the provisions of Section 245C(5) of the Act are required to be read down. With respect to the impugned notification, the question in the present case is not of reading down of the notification, but the question is whether the notification goes beyond the provisions of the Act. If the notification goes beyond the provisions of the Act, then to that extent, the notification is clearly inva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date when the assent of the Hon ble President of India was received to promulgate the Finance Act, 2021. Sub-section (5) of Section 245C of the Act provides that no application shall be made under this section on and after 1st February 2021. Petitioner had already made the application on 18th March 2021 when sub-section (5) was not in the statute and hence, petitioner had made the valid application as per the provisions of the Act. The purport of sub-section (5) is not to make an application already filed after 1st February 2021 as invalid but it should be read as no application shall be made after 1st February 2021 once the assent of the Hon ble President of India has been received. But before receipt of the assent any application made by an assessee will not be hit by sub-section (5) of Section 245C of the Act. 35. In the circumstances, (a) the notice dated 16th September 2021 is hereby quashed and set aside; (b) the impugned notification dated 28th September 2021 in so far as it seeks to make only those assessees eligible to file application before the Settlement Commission who were eligible as on 31st January 2021 is held invalid; and (c) the application filed by petitioner be ..... 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