Bombay High Court
Ms Shree Atharva Buildcon Through The ... vs The Central Board Of Direct Taxes on 28 August, 2024
Author: G.S. Kulkarni
Bench: G. S. Kulkarni
2024:BHC-OS:14109-DB
912-WPL-3128-2024 5 9 2024 VK EDIT.DOC
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (LODG.) NO. 3128 OF 2024
Atharva Builders and Developers ... Petitioner
Versus
1. The Central Board of Direct Taxes
& 5 Others ...Respondents
WITH
WRIT PETITION (LODG.) NO. 13641 OF 2024
M/s. Shree Atharva Buildcon
through the Secretary, ... Petitioner
Department of Revenue, Ministry of Finance
Versus
1. The Central Board of Direct Taxes
& Others ...Respondents
Digitally
signed by
SHRADDHA
SHRADDHA KAMLESH
WITH
KAMLESH TALEKAR
TALEKAR Date:
2024.09.12
WRIT PETITION (LODG.) NO. 20430 OF 2024
15:16:54
+0530 Ashok Vishwanath Tribhuvan ... Petitioner
Versus
1. The Central Board of Direct Taxes
& Others ...Respondents
Mr. Rohan Deshpande i/b Mr. Smit Shah, for petitioner.
Mr. Suresh Kumar, for respondents.
_______________________
CORAM: G. S. KULKARNI &
SOMASEKHAR SUNDARESAN, JJ.
Date : August 28, 2024
_______________________
Oral Judgement (per, G.S. Kulkarni, J. ) :-
1. Rule. Rule made returnable forthwith. Respondents waives service. By
consent of the parties, heard finally.
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2. Mr. Deshpande, learned counsel for the petitioner states that common issues
are involved in these two petitions. Writ Petition No. 3128 of 2014 is taken up for
hearing as a lead petition. We refer to the facts and submissions as made in the lead
petition.
3. This petition under Article 226 of the Constitution of India although has
prayed for several reliefs, however, essentially, the challenge as mentioned in the
petition is to an order dated 29 August, 2023 (" impugned order") passed by
respondent No.2-Interim Board for Settlement-1, New Delhi (" IBS") under Section
245D(4) of the Income Tax Act, 1961 (" the Act"). By such order, the petitioner's
application dated 15 March, 2021 ( referred as '29 September, 2021') has been
rejected as not maintainable on account of the purported non-fulfillment of the
requirements in the order dated 28 September 2021 passed under section 119(2)(b)
of the Act, issued by the Central Board of Direct Tax. The relevant observations as
made in the impugned order are required to be noted, which read thus :
7.4 From the above provisions of the Act read with the order u/s 119(2)
(b) of CBDT dated 28.09.2021 mentioned and-quoted in the earlier part of
this order, it is clear that for being eligible to file an application for
settlement before the Interim Board for Settlement, proceedings under
section 1534/153C should have commenced as on 31.01.2021.
7.5 As regards the application for the assessment year 2020-21 in case
of M/s Atharv Builders and Developers( Specified Person), the return of
income for the said assessment year was filed on 10.03.2021, i.e., after
31.01.2021. The application is, therefore, hit by the provisions of
explanation (iv) to clause (b) of section 245A of the Income tax Act,1961,
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read with order u/s 119(2)(b) dt. 28.09.2021 of the Board. Therefore, no
proceedings can be deemed to have commenced in respect of the AY 2020-
21. The application for this assessment years cannot, therefore, be covered
under the meaning of 'case' as defined in Sec 245(4) of the Act.
7.6 The application, therefore, becomes ineligible on account of non
fulfillment of this condition as provided in the Act read with order u/s
119(2)b) dt. 28.09.2021 of the Board. The application cannot , therefore, be
taken up for settlement.
7.7 As regards the applications for the AY 2014-15 to 2019-20, these
would be covered within the meaning of 'case' as defined in Sec. 2454 of the
Act. However, once the application for the AY 2020-21 becomes ineligible
and does not fulfill the mandatory and substantive provisions prescribed for
taking up the case for settlement, the additional amount of tax payable does
not cross the benchmark of fifty lakh rupees, which is the prerequisite
condition under clause () of the first proviso to section 245C(1) of the
Income Tax Act, 1961 for the applications to be considered as valid.
Therefore, these applications become ineligible for being considered by the
Interim Board for Settlement for settlement. It may be noted that the total
amount of the tax payable in respect of the AYs 2013-4 to 2019-20 works
out to Rs 43,64,291/- only as follows, which is below the minimum
prescribed limit of fifty lakh rupees:-
Sr. No. AY Tax Payable on Additional Income declared before
IBS in case of Atharv Builders and
Developers( Specified Person)
1 2014-15 1,61,215
2 2015-16 8,55,927
3 2016-17 7,47,321
4 2017-18 6,77,467
5 2018-19 9,42,462
6 2019-20 9,79,898
Total 43,64,290
4. The relevant facts are required to be noted :
(a) On 10 March 2021, the petitioner filed its return of income for
Assessment Year 2020-21. Prior thereto, on 8 January, 2020, notices
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under Section 153A for Assessment Years 2014-15 to 2018-19, and
under section 143(2) of Assessment Year 2019-20 were issued to the
petitioner and appropriate returns are stated to be filed by the
petitioner for the said assessment years.
(b) On 15 March, 2021, the petitioner filed a settlement application
before the Income Tax Settlement Commission, Additional Bench at
Mumbai ("ITSC") in respect of pending assessment proceedings for the
Assessment Years 2014-15 to 2020-21. An intimation of such
application being filed was also served on the Assessing
Officer/Respondent No.4. It is also the case of the petitioner that the
petitioner was a "specified person" under the first proviso to Section
245C(1) of the Act, and accordingly was entitled to maintain the
settlement application.
(c) Soon after the filing of the settlement application, on 28 March,
2021, Finance Bill, 2021 received Presidential assent and became
Finance Act, 2021, notified with effect from 1 April, 2021. On such
date, the settlement application was filed by the petitioner and the
same was pending. As a consequence of the Finance Act, 2021, on 10
August, 2021, the IBS came to be constituted by the Central
Government.
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(d) The CBDT on 28 September, 2021 issued an order under
section 119(2)(b) of the Act setting out two additional eligibility
conditions for filing settlement applications, namely :
(i) the assessee should be eligible to file settlement
application on 31 January, 2021; and,
(ii) the assessment proceedings for the relevant
assessment years should be pending on the date of the
filing of the application.
(e) On 1 August, 2022, the petitioner's settlement application was
assigned to the IBS.
(f) On 20 September, 2022, the Rule-9 Report filed by the
Principal Commissioner of Income Tax/Respondent No.3 was
provided to the petitioner which inter alia questioned the eligibility of
the settlement application in the context of the conditions set out in
the impugned CBDT Order. The petitioner filed its reply to the Rule 9
Report in November 2022.
5. It is on such backdrop, the impugned order dated 29 August, 2023 was passed
by respondent No.2/IBS, inter alia, holding the petitioner's settlement application to
be ineligible with reference to the CBDT's order for Assessment Year 2020-21,
considering that no proceedings were pending as on 31 January, 2021. Also, as the
lead application filed by the petitioner as the 'specified person' was held to be
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ineligible. The other two applications filed by the related parties under the first
proviso to Section 245C(1) of the Act were also rejected by the impugned order.
These are the orders which are independently challenged in the companion writ
petition.
6. At the outset, Mr. Deshpande, learned counsel for the petitioner would draw
our attention to the decisions of this Court in Sar Senapati Santaji Ghorpade Sugar
Factory Ltd. Vs. Assistant Commissioner of Income-tax 1 ("Sar Senapati") to submit
that the issue of eligibility of the petitioner to maintain a settlement application is no
more res integra in terms of such pronouncement of this Court. Mr. Deshpande has
also brought to our attention a recent decision rendered by us in M/s. Vishwakarma
Developers Vs. The Central Board of Direct Taxes through the Secretary (Revenue)
& 4 Ors. 2 ("Vishwakarma Developers") to submit that referring to the decision in
Sar Senapati , this Court in similar circumstances, in the present case, had set aside
the orders passed by the IBS rejecting the application of the petitioner therein, on the
ground that the conditions as incorporated in paragraph 4 of the CBDT's order dated
28 September 2021 issued under section 119(2)(b) of the Act being applied. The
Court held that the petitioner's settlement application was maintainable to be
considered by the IBS.
[2024] 161 taxmann.com 166 (Bombay)
Writ Petition (L.) 31523 of 2023 dated 24 July, 2024.
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7. On the other hand, Mr. Suresh Kumar, learned counsel for the respondents
would not dispute as to what has been held by this Court in Sar Senapati as also in
Vishwakarma Developers. We have already noted the ground on which the
petitioner's settlement application was held to be not eligible, which is a ground
akin to the rejection which had fallen for consideration before this Court in the
decisions as noted by us hereinbefore. The relevant observations as made by this
Court in the decision of Vishwakarma Developers are required to be noted, which
read thus :
10 The Petitioner has contended that as the Petitioner's settlement
application was rejected by the IBS, on 13th October, 2023 and 1st November,
2023, the Assessing Officer issued to the Petitioner a notice under Section
142(1). It is in these circumstances, the present Petition was filed on 4 th
November, 2023, which also prays for a relief that the Order dated 28 th
September, 2021 passed by the CBDT under Section 119(2)(b) of the Act
(supra) be quashed and set aside and a writ of mandamus be issued to direct
the IBS to adjudicate the Petitioner's settlement application.
11 Mr. Naniwadekar, Learned Counsel for the Petitioner, at the outset,
would submit that the Order dated 28 th September, 2021 passed by the CBDT,
insofar as, it incorporated Condition No.4, was subject matter of challenge
before this Court in the case of Sar Senapati Santaji Ghorpade Sugar Factory
Ltd. Vs. Assistant Commissioner of Income-tax. In such decision the Court
struck down Paragraph 4 of the CBDT's Order dated 28th September, 2021,
declaring it to be ultra vires of the parent Act, as it incorporated additional
eligibility conditions for filing Settlement Applications which were as under:-
"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 assessemnt years for which the
application is sought to be filed (relevant assessement
years); and
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(ii) where the relevant assessement proceedings of the assessee
are pending as on the date of filing the application for
settlement."
***
15 Having heard Learned Counsel for the parties and having perused the
record, we are in agreement with Mr. Naniwadekar that the impugned order
would be required to be held to be illegal being contrary to the decision of this
Court in Sar Senapati Santaji Ghorpade Sugar Factory Ltd. (supra).
16 As noted above in Sar Senapati Santaji Ghorpade Sugar Factory Ltd.
(supra), the Court, considering the provisions of Section 192 of the Act as also
the other relevant provisions of the Act, has held that the Notification dated
21st September, 2021 issued by the CBDT under Section 119(2)(b) of the Act,
although was issued within the powers as conferred on the CBDT, however, to
the extent it laid down additional conditions in Para 4 that the assessee should
be eligible to file an application for settlement on 21 st January, 2021, was held
to be beyond the scope of powers of the CBDT under Section 119 of the Act.
The Court observed that there was no provision in the Act empowering the
CBDT to impose such eligibility conditions in regard to extending the cut-off
date to make an application under Section 245C of the Act. Hence, such
condition in the impugned notification which offered the statutory mandate
was held to be invalid and bad in law. It was held that the assessee in such
case, therefore, had become eligible to make an application. The relevant
observations of the Court are required to be noted, which read thus :-
24 As regards the notification dated 28 th 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 Act. Section 119 of
the Act provides that the Board may from time to time, issue such
orders, instructions and directions to other Income Tax Authorities
as it may be deemed fit for proper administration of this Act. The
provisions of the section have been interpreted by the Hon'ble Apex
Court in UCO Bank (Supra) to mean that the Board is entitled to
tone down the rigours of law by issuing circulars under Section 119
of the Act and such circulars would be binding on Income Tax
Authorities. A circular, however, cannot impose on a taxpayer a
burden higher than what the Act itself, on a true interpretation,
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envisages. Therefore, the Board had power to extend the time limit
for making an application to 30th September 2021.
However, to the extent it lays down an additional condition, i.e.,
assessee should be eligible to file an application for settlement on
31st January 2021 in paragraphs 2 and 4(i) of the impugned
notification, in our view, is beyond the scope of the power of CBDT
as per Section 119 of the Act. There is no provision in the Act
providing a cut off date with respect to an assessee being eligible to
make an application under Section 245C of the Act. Hence, such a
condition in the impugned notification is clearly invalid and bad in
law.
The date on which an assessee becomes eligible to make an
application and the date on which the assessee makes an
application are two different things and the Act only provides a cut
off date for the latter and not the former. Section 245C of the Act as
amended by the Finance Act, 2021, provides that an application
shall not be made after 1st February 2021, i.e., cut off date for
making an application. However, there is no provision in the Act
with respect to the cut off date for an assessee to be eligible to
make an application. Further, there is no amendment to the
definition of "case" in Section 245A(b) read with the Explanation,
which would affect the eligibility of petitioner to file an application
before the Settlement Commission between the period 1 st February
2021 and 31st March 2021. Hence, the impugned notification, to
that extent, is invalid and bad in law.
25 As the Board does not have the power to provide an
additional condition of date of eligibility for making application for
settlement (because no such date is prescribed in the Act),
paragraphs 2 and 4(i) of the impugned notification to the extent
that 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.
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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 5 th
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
respondents by issuing a circular under Section 119 of the Act. If
the notice under Section 153A of the Act would have been issued on
or before 31st of January 2021, petitioner would have been eligible
to make an application. Therefore, when the eligibility is dependent
on the action of respondent no.1 to issue a notice and when
respondent no.1 issues a notice after inordinate delay from the
search, respondent no.1 should not be entitled to claim that
petitioner has lost its right to approach the Settlement Commission
on account of such delayed action of respondent no.1 itself. Hence,
even otherwise, on the facts of the present case, respondent no.1
should be estopped from contesting/contending that petitioner is
not eligible for approaching the interim board for having its
application settled by the appropriate authority.
17 In the light of the above discussion, in our opinion, the impugned order
passed by the Interim Board of Settlement rejecting the Petitioner's
application on the ground that the conditions as incorporated in Para 4 of the
CBDT's Order dated 28th September, 2021 issued under Section 119(2)(b) of
the Act would become applicable, is required to be held illegal and will be
required to be quashed and set aside. The Petitioner certainly was eligible for
its Settlement Application to be considered by the Interim Board of Settlement
for appropriate orders to be passed on it in accordance with law."
(emphasis supplied)
8. Mr. Suresh Kumar, however, has raised another contention to oppose the
present proceedings, namely, by referring to section 245C(1)(ia) of the Act to
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conclude that the petitioner's settlement application be held to be not maintainable
when tested on the provisions of the first proviso of Section 245C(1)(ia) considering
the assessment years and amounts as involved by bifurcating the amounts in respect
of the search years and the non-search years. However, we are of the opinion that the
contention as urged by Mr. Suresh Kumar would be a contention relevant to be urged
before the IBS. Certainly, it would be one of the jurisdictional issue and it would be
required to be gone into, considering the case of the petitioner in each of the
assessment years and subject matter of consideration of the settlement application as
made by the petitioner. In the present proceedings, we are concerned with the
limited issue on the ground on which the settlement application filed by the
petitioner has been rejected by the IBS as noted by us hereinabove which appears to
be indisputably covered by the decision of this court in Sar Senapati as also followed
in Vishwakarma Developers.
9. In the aforesaid circumstances and the limited discussions as made
hereinabove, we are inclined to allow the petition in terms of the following order :
(i) The impugned order dated 29 August, 2023 passed by the
Interim Board for Settlement is hereby quashed and set aside.
(ii) It is held that the application as filed by the petitioner is liable to
be considered by the Interim Board for Settlement. However, keeping
open all objections/contentions of the revenue, including on the
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applicable threshold limits in terms of first proviso to section 245C(1)
of the Act.
(iii) As we have allowed the petition on the aforesaid limited ground,
we have not examined the petitioner's case on the challenge to the
constitutional validity of these provisions and in which regard all
contentions of the petitioner are expressly kept open.
(iv) Writ Petition (L.) No. 3128 of 2024 stands disposed of in the
aforesaid terms. No costs.
10. Insofar as the other petitions, namely, Writ Petition (L.) No. 13641 of 2024
(M/s. Shree Atharva Buildcon Vs. The Central Board of Direct Taxes & Ors.) and
Writ Petition (L.) No. 20430 of 2024 (Ashok Vishwanath Tribhuvan Vs. The
Central Board of Direct Taxes & Ors.) are concerned, learned counsel for the parties
would agree that these petitions can also be disposed of in terms of the above
operative order and for the reasons as set out in our aforesaid judgment.
11. Writ Petition (L.) No. 13641 of 2024 and Writ Petition (L.) No. 20430 of
2024 stand disposed of on similar terms as in Writ Petition (L.) No. 3128 of 2024.
No costs.
12. Rule is made absolute in the aforesaid terms. No costs.
(SOMASEKHAR SUNDARESAN, J.) (G. S. KULKARNI , J.)
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