Gujarat High Court
M/S Vetrivel Infrastructure vs Deputy Commissioner Of Income Tax, ... on 14 June, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 21052 of 2023
With
R/SPECIAL CIVIL APPLICATION NO. 1010 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 991 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 1181 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 1246 of 2024
With
CIVIL APPLICATION (FOR INTERIM RELIEF) NO. 1 of 2024
In R/SPECIAL CIVIL APPLICATION NO. 1246 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 6134 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 20532 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA Sd/-
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA Sd/-
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1 Whether Reporters of Local Papers may be allowed No
to see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy No
of the judgment ?
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
M/S VETRIVEL INFRASTRUCTURE
Versus
DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3 & ORS.
Page 1 of 49
Downloaded on : Fri Jun 28 21:33:57 IST 2024
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Appearance:
MR DHINAL A SHAH (12077) for the Petitioner(s) No. 1
MS VAIBHAVI K.PARIKH for the Petitioner(s) No. 1
MR JIMI PATEL ADV FOR MR DARSHAN GANDHI for the Petitioner
KARAN G SANGHANI and MR VARUN K PATEL AGP(7945) for the
Respondent(s) No. 1
NOTICE SERVED for the Respondent(s) No. 2,3
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 14/06/2024
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr.Dhinal Shah,
learned advocate Ms.Vaibhavi K. Parikh,
learned advocate Mr.Jimi Patel for learned
advocate Mr.Darshan Gandhi for the
petitioners and learned Senior Standing
Counsels Mr.Varun K.Patel and Mr.Karan
Sanghani for the respondents.
2. Rule returnable forthwith. Learned
advocates for the respective parties waive
service of notice of rule for the
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respective respondents.
3. Having regard to the controversy in
narrow compass, with the consent of
learned advocates for the respective
parties, these petitions are taken up for
hearing.
4. As the issue arising in these
petitions is similar, the same were heard
analogously and are being disposed of by
this common Judgment.
5. In all these petitions the petitioners
have prayed for quashing and setting aside
notice under Section 148 of the Income Tax
Act, 1961 (for short 'the Act') and the
order under Section 245D(4) of the Act
passed by the Interim Board of Settlement.
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6. The brief facts of the each petitions
are as under:
SCA No. A.Y. Date of Date of Date of
Notice u/s Order u/s filing of
148/153A 245D(4) application
for
settlement
21052/2023 2016-17 30.06.2021 02.08.2023 26.03.2021
20532/2023 2017-18 24.03.2021 02.08.2023 26.03.2021
991/2024 2019-20 19.07.2021 20.12.2023 30.09.2021
2020-21
1010/2024 2019-20 to 19.07.2021 20.12.2023 30.09.2021
2020-21
1181/2024 2019-20 to 19.07.2021 20.12.2023 30.09.2021
2020-21
1246/2024 2010-11 to 06.02.2021 30.12.2023 19.03.2021
2013-14
6134/2024 2013-14 to 31.01.2021 29.12.2023 24.03.2021
2017-18
7. In this group of petitions for the
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Assessment Years which are referred to in
the above table, the Interim Board for
Settlement has held that the applications
filed by the petitioners for settlement
for the said Assessment Years, the
petitioners were not eligible to file
application for settlement as the
petitioners have not filed application for
settlement on or before 31.01.2021 for the
relevant Assessment Years in view of the
amendment in Section 245C of the Act by
Finance Act, 2021 with effect from
01.02.2021.
8. It is the case of the petitioners that
the petitioners are liable to file
application for settlement on or before
31.03.2021 as the Finance Act, 2021
received the assent of the President on
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01.04.201 and therefore till 31.03.2021,
the Settlement Commission continued to
operate and it cannot be said that the
Finance Act, 2021 would come into effect
with effect from 01.02.2021.
9. Learned advocates for the petitioners
submitted that the issue with regard to
the maintainability of the Settlement
Applications filed prior to 31.03.2021 as
well as notices issued prior to the said
date under Section 148 or 153A of the Act
would be maintainable before the Interim
Board for Settlement, more particularly in
view of the Circular No.299/22/2021-Dir
(Inv.-III)/174 dated 28.09.2021 issued by
the Central Board of Direct Taxes (for
short 'CBDT') in exercise of powers under
Section 119(2)(b) of the Act which reads
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as under:
"....3. In view of the above, the
Board in exercise of its power
under clause (b) of sub-section
(2) of section 119 of the Income-
tax Act, 1961 (the Act), in order
to avoid genuine hardship to
assesses authorizes the
Commissioner of Income-tax,
posted as Secretary to the
Settlement Commission prior to
01.02.2021, to admit an
application for settlement on
behalf of the Interim Board filed
after 31.01.2021 which is the
date mentioned in sub-section (5)
of section 245C of the Act for
filing such application, and
before 30.09.2021 and treat such
applications as valid and process
them as "pending applications" as
defined in clause (eb) of section
245A of the Act.
4. The above relaxation is
available to the applications
filed:-
(i) by the assesses who were
eligible to file application for
settlement on 31.01.2021 for the
assessment years for which the
application is sought to be filed
(relevant assessment years); and
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(ii) where the relevant
assessment proceedings of the
assessee are pending as on the
date of filing the application
for settlement..."
10. It was submitted that the respondents
have misinterpreted above Notification to
hold that the petitioner must be eligible
to file application for settlement on
31.01.2021 for the relevant Assessment
Years as per Section 245A(b) read with
Section 245C(1) of the Act which reads as
under:
"Section 245A(b) of the Income
Tax Act contains the definition
of case to mean any proceedings
for assessment under this Act, of
any person in respect of any
assessment year or assessment
years which may be pending before
the Assessing Officer on the date
on which an application under
section 245C (1) is made.
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Explanation (i) to section 245A
(b) provides that a proceeding
for assessment or reassessment or
re-computation under section 147
shall be deemed to have
commenced-
(a) from the date on which a
notice under section 148 is
issued for any assessment year;
(b) from the date of issuance of
the notice referred to in sub-
clause (a), for any other
assessment year or assessment
years for which a notice under
section 148 has not been issued,
but such notice could have been
issued on such date, If the
return of income for the other
assessment year or assessment
years has been furnished under
section 139 or in response to a
notice under section 142.
Thus as per the provisions of
this section the proceedings
commence on the date of issue of
notice under 148 or if it has not
been issued but the mandate still
exists for issue of such notice.
Section 245C(1) lays down the
other conditions essential while
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filing an application for
settlement.
245C. ((1) An assessee may, at
any stage of a case relating to
him, make an application in such
form and in such manner as may be
prescribed, and containing a full
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: [Provided
that no such application shall be
made unless,-
(i) in a case where proceedings
for assessment or reassessment
for any of the assessment years
referred to in clause (b) of sub-
section (1) of section 153A or
clause (b) of sub-section (1) of
section 1538 in case of a person
referred to in section 153A or
section 153C have been initiated,
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the additional amount of income-
tax payable on the income
disclosed in the application
exceeds fifty lakh rupees,
((ia) in o case where-
(A) the applicant is related to
the person referred to in clause
(1) who has filed an application
(hereafter in this sub-section
referred to as "specified
person"); and
(B) the proceedings for
assessment or re-assessment for
any of the assessment years
referred to in clause (b) of sub-
section (1) of section 153A or
clause (b) of sub-section (1) of
section 1538 in case of the
applicant, being a person
referred to in section 153A or
section 153C, have been
initiated,
the additional amount of income-
tax payable on the income
disclosed in the application
exceeds ten lakh rupees,]
(ii) in any other case, the
additional amount of income-tax
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payable on the income disclosed
In the application exceeds ten
lakh rupees, and such tax and the
interest thereon, which would
have been paid under the
provisions of this Act had the
income disclosed in the
application been declared in the
return of income before the
Assessing Officer on the date of
application, has been paid on or
before the date of making the
application and the proof of such
payment is attached with the
application."
11. Referring to the above provisions it
was submitted that the respondent Board
could not have passed the following order
challenged in case of Special Civil
Application No.21052 of 2023 and similar
reasoning is adopted in all the matters:
"Thus, it is apparent from the
reading of the relevant sections as
per the Income Tax Act, that for the
applicant to be eligible to file an
application for settlement as per
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the circular of the Board, the
notice under section 148 should have
been issued before 31.01.2021.
However, in case of the applicant,
it is evident that notices u/s 148
for the A.Y 2017-18 has been issued
by the jurisdictional Assessing
Officer after 31.01.2021 i.e. on
24.03.2021, as seen above at para
4-.1 supra which means that there is
no eligibility in respect of
application for this A.Y 2017-18 as
on 31.01.2021. The notice under
section 148, for A.Y. 2016-17 has
been issued subsequently i.e. on 30-
06-21 and thus it is also not a
eligible case as on 31-01-2021 since
assessment proceedings have not
commenced on date. Therefore, the
Board is of the view that in the
case of the applicant the assessee
is no eligible to file applications
for AYs 2016-2017 and 2017-2018 as
on 31-01-2021 and therefore the
eligibility criterion for filling of
Settlement Applicant, as laid down
under the Act read with the
Notification No. 299/22/2021-Dir
(Inv. III)/174 dated 28.09.2021 is
not fulfilled. As a result, these
two assessment years cannot be
considered for settlement before the
Interim Board."
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12. It was submitted that the above
reasoning on which the petitioners are
held not eligible to file the application
for settlement has been considered by the
Hon'ble Madras High Court in case of Jain
Metal Rolling Mills Vs. Union of India
(Madras) and in the decision of Hon'ble
Bombay High Court in case of Sar Senapati
Santaji Ghorpade Sugar Factory Ltd. Vs.
Assistant Commissioner of Income Tax And
Ors. rendered on 02.04.2024 in Writ
Petition no.5682 of 2021. It was therefore
submitted that the petition deserves to be
allowed in view of the aforesaid decisions
of the Hon'ble Madras High Court and the
Hon'ble Bombay High Court, wherein the
provisions of the statute have been read
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down in respect of the date to be read as
31.03.2021 instead of 01.02.2021 and all
the applications in respect of the
petitioners including in respect of the
applications for settlement filed between
date 01.02.2021 to 31.03.2021 is required
to be deemed as pending applications for
the purpose of consideration by the
Interim Board and the orders passed by the
Interim Board holding such applications as
not pending were set aside and such
applications were ordered to be pending
applications for consideration by the
Interim Board, if otherwise in order
eligible to be dealt with and in
accordance with law on merits and in
accordance with the scheme that may be
framed by the Central Government as in
respect of other cases which arose prior
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to 31.01.2021.
13. On the other hand, learned advocates
for the respondent submitted that the
orders passed by the Hon'ble Madras High
Court in case of Jain Metal Rolling Mills
(Supra) is challenged by the respondents
before the Hon'ble Supreme Court and the
matter is pending.
14. Learned advocates for the respondents
referred to and relied upon the decision
of the Hon'ble Bombay High Court in case
of EBR Enterprises and Another Vs. Union
taxmann.com 220 (Bombay) to submit that in
the facts of the said case arising under
Section 80-(IB)(10) of the Act, the
legislature granted deduction in relation
to income arising out of the development
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of housing projects to the assessee,
fulfilling the conditions contained
therein as inserted by Finance(No.2) Act,
2009 with retrospective effect from
01.04.2003, Section 80A of the Act which
was also contained in Chapter VI A of the
Act pertains to the deduction to be made
in computing total income and Subsection 5
of Section 80A of the act was inserted by
Finance(2) Act, 2009 with retrospective
effect on 01.04.2003, wherein it is
provided as where the assessee fails to
make claim in his return of income or any
deduction under Section 10A, 10AA, 10B,
10 BA or any provision under Chapter VIA
under the heading VIA, no deduction would
be allowed under the said provisions.
15. It was submitted that the provisions
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contained in Subsection 5 of Section 80A
of the Act was held to be statutory
interdict which would prevent the
Commissioner from granting any claim in
exercise of its Revisional Jurisdiction
under Section 264 and even the High Court
in exercise of extra writ jurisdiction
under Article 226 of the Constitution of
India would not issue directions contrary
to the statutory provisions. It was
therefore submitted that in the facts of
the present case, when the Settlement
Commission ceases to exist from
01.02.2021, any notice issued under
Section 148 or under Section 153A or any
further Assessment Proceeding whether
initiated or not after 01.02.2021, would
not give any eligibility to the assessee
to file application for settlement upto
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31.03.2021 considering the fact that the
Finance Act, 2021 was given assent on
01.04.2021.
16. Learned advocates for the respondents
also referred to and relied upon decision
of this Court in case of Prashanti Medical
Services and Research Foundation Vs. Union
of India reported in [2017] 399 ITR 450
(Gujarat) wherein it is held that Section
35AC of the Act, which was withdrawn with
effect from 01.04.2017 and the exemption
provided by the said section was denied
from the A.Y. commencing on or after
01.04.2018, and this Court held that the
deduction was not confined to the services
which the petitioner is dispensing and
would cover range of projects and schemes
for promoting the Social and Economic
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welfare of the public as may be notified
and once the legislature desired to
withdraw such deduction, any expenditure
after such date would no longer be an
eligible deduction. It was further held
that the provision applies prospectively,
and the legislature was competent to
introduce such amendment. It was submitted
that the Hon'ble Supreme Court has also
confirmed decision of this Court.
17. Reliance was also placed on the
decision of the Madras High Court in case
of S.P.A.M. Krishnan Chettiar & Sons Vs.
Income Tax Settlement Commission reported
in [1993] 202 ITR 81 (Madras), wherein it
is held that amendment of Section 245C by
the Amendment Act with effect from
01.10.1984 was purely procedural and would
govern the application filed on 09.08.1989
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and the application was rejected on the
ground that it did not contain the
particulars required by the Section 245C
of the Act and was not entertained. It was
therefore submitted that, if the
application is filed without taking the
procedural changes in the provisions of
the Section 245C of the Act, which is held
to be purely a machinery Section without
providing certain particulars as
prescribed in Form 34B, application was
not entertained by the Settlement
Commission.
18. Reliance was also placed on the
decision of the Madras High Court in case
of Pitchai Rajagopal Shiva Kumar Vs. Union
of India reported in [2022] 442 ITR 33
(Madras), wherein the petitioner gave up
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the challenge to the Constitutional
validity in view of the directions to the
respondents to send applications to the
constitution consideration by the Interim
Board, if submitted before 30.09.2021 and
consideration of the application by the
Interim Board would be taken up if the
proceedings are pending as on 31.01.2021.
It was therefore submitted that the
petitioners in the said case have accepted
that the Interim Board can take
applications filed before 30.09.2021 in
view of the notification issued by the
CBDT, if the petitioners were eligible to
file applications prior to 31.01.2021. It
was therefore submitted that in the facts
of the present case, the petitioners were
not eligible to file applications for
settlement as on 31.01.2021 and therefore,
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the petitioners cannot be said to be
having any eligibility for the
applications filed after 31.01.2021 in
respect of notices issued under Section
148 or 153A of the Act after 31.01.2021.
19. Having heard learned advocates for the
parties, the issue raised in these
petitions with regard to the eligibility
of the petitioners to file application for
settlement prior to 31.03.2021 is no more
res integra in view of the decision of the
Hon'ble Madras High Court in case of Jain
Metal Rolling Mills (Supra). The facts of
each case are not narrated in detail as
the issue of eligibility is already
decided by the Hon'ble Madras High Court
as well as the Hon'ble Bombay High Court
wherein it is held that the eligibility
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condition in the notification issued under
Section 1192(b) of the Act should be read
as 31.03.2021 and not as 31.01.2021 as
Finance Act, 2021 was notified with effect
from 01.04.2021 and therefore the
eligibility of the petitioners to file the
application for the settlement had to be
considered from immediately preceding
date. In view of the decision of the
Hon'ble Madras High Court the impugned
notice/order passed by the respondent
Board holding the applications filed by
the petitioners as invalid and valid law
is clearly not sustainable in view of the
decision of the Hon'ble Madras High Court,
reading down the eligibility conditions
would applicable PAN India.
20. Section 245C of the Act provides that
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an assessee may at any stage of the case
relating to him, make an application in
such form and in such manner as may be
prescribed and containing full and true
disclosure of his income which has not
been disclosed before the Assessing
Officer, make an application before the
Settlement Commission in the prescribed
format disclosing the manner in which the
income has been derived and the additional
amount of income tax payable on such
income for settlement of the case and such
application to be disposed of by the
Settlement Commission in accordance with
provisions of the Act.
21. Section 245A(b) of the Act defines the
word 'case' to mean any proceedings for
the assessment under the Act of the any
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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. The proceedings of
assessment or reassessment of any
Assessment Year therefore would commence
from the date of issuance of the notice
initiating such proceedings and concluded
on the date on which the assessment is
made. Therefore in the facts of the
petitioners, proceedings for relevant
Assessment Years would fall within meaning
of the 'case' when the notice under
Section 148 or 153 is issued and as the
petitioner has made an application as per
Section 245C(1) of the Act on issuance of
the notice, prior to 31.03.2021, there was
no prohibition on the petitioner to make
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such application as 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
different form and till the Finance Bill
becomes the Act, it did not become the
law. It is not in dispute that the Finance
Act 2021 was notified with effect from
01.04.2021 before which the petitioners
have already filed applications for the
Settlement.
22. Therefore, the amendment made by the
Finance Act despite being retrospective in
nature, with effect from 01.02.2021 would
not affect the vested right of the
petitioners to prefer application for
settlement of their cases as per the
procedure prescribed in Chapter XIX-A of
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the Act.
23. 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,
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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.
24. Reliance placed by the respondents on
the decisions of this Court in case of EBR
Enterprises (Supra) and Prashanti Medical
Services and Research Foundation (Supra)
therefore would not be applicable as the
facts in the present case are totally
different and the issue of coming into
force of statute was not before the Court
while deciding the retrospective effect
of an amendment vis-a-vis the intention of
the legislature. The Hon'ble Madras High
Court in case of Jain Metal Rolling Mills
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(Supra) in the similar facts has held as
under:
"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 sought to be
filed (relevant assessment
years); and
(ii) where the relevant
assessment proceedings of the
assessee are pending as on the
date of filing of the
application for settlement."
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7.As a matter of fact, immediately after
the introduction of the Bill before the
Parliament, fresh applications were not
accepted before the ITSC as such,
several petitioners had approached the
Courts of law and upon directions of
Court their applications were received
and are pending. After the extension of
time upto 30.09.2021, in some cases, the
applications were rejected on the ground
that the Orders/Notices of re-opening
etc., were issued on or after
01.02.2021, by considering the
eligibility clause as contained in the
circular dated 28.09.2021. Hence, the
aggrieved petitioners are before this
Court, broadly with the above prayers
challenging the Constitutional Validity
of the provisions of the Finance Act,
2021, as also challenging the validity
of the Circular dated 28.09.2021 and the
consequential orders that are passed in
their individual cases.
8.It is the case of the Writ Petitioners
that their statutory remedy of
approaching the ITSC, cannot be taken
away retrospectively. Retrospective
legislation cannot affect the vested
rights. It also overrides the directions
of Courts issued in the interregnum. As
such, the provisions as aforementioned
in the prayer are unconstitutional.
Similarly, the Department is entitled to
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prescribe the last date even beyond the
original cut-off 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. To the said extent, the
impugned circular is illegal.
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 ?
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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; (iii) It cannot add
any new condition or anything contrary
to the statute; (iv) But, in order to
mitigate the rigor of the provisions for
the benefit of the assessees in certain
specified circumstances, it can even
travel beyond so as to grant
administrative relief to the taxpayer,
but, it shall not impose any new burden
on him.
36.In that conspectus, with the Finance
Act, 2021, in the background as such, it
can be seen that by virtue of proviso to
Section 245B, the ITSC is made
inoperative with effect from 01.02.2021.
Similarly, the Section 245C(5) also
plays an embargo that no application
shall be made under the section on or
after 01.02.2021. The proviso to Section
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245D(2C) deems that if no order is
passed as on 31.01.2021 under the
section, the application is deemed to be
valid. The powers of the ITSC under
Sections 245DD, 245F, 245G, 245H are all
specifically entrusted to be exercised
by the Interim Board with effect from
01.02.2021. Further, Sections 245D(9),
stipulates that from 01.02.2021, 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
modifications mentioned therein. In this
background, the circular can only grant
administrative relief to the assessees.
Therefore, considering the fact that the
Finance Act, 2021 was retrospective in
nature. Those who have had a right to
approach ITSC i.e., those who had a case
pending against them would have missed
the bus in not actually filing the
application before the ITSC as the same
was retrospectively made inoperative.
Only for the said action of filing the
application, the circular extend the
date by 30.09.2021, even though as per
the Act, it was only 01.02.2021. In that
context, when paragraph No.4
categorically states that only those
assessees who are eligible to file an
application for settlement as on
31.01.2021, it cannot be said that it
introduces an additional clause of
eligibility which is not found in the
statute. On the other hand, if only such
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clause 4(i) is not there, it would
render violence to the Finance Act,
2021. Therefore, we are unable to accept
the contentions on behalf of the writ
petitioners that the circular imposes an
additional condition of eligibility
which is not there in the statute. Even
though there is no specific provision
regarding eligibility, the right to
approach the ITSC 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
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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/benevolence. Therefore, the
question with which we are concerned is
the 'right to approach' the ITSC which
is a statutory right conferred by
Chapter XIX-A of the Act, more
specifically, Section 245C of the Act by
filing an application. Therefore, the
assessees had a statutory right to
approach the ITSC. Like any other
appellate or revisional remedy which is
a creature of statute, to right to seek
resolution through ITSC was also
conferred by the statute. Of course, it
is well within the policy realm of the
State to take away the remedy. It is not
for this Court to substitute its opinion
as to the abolition of the ITSC and
taking away the procedure of resolution
of the disputes through ITSC under
Chapter XIX-A. The State had every right
to abolish the ITSC. Therefore, the
Parliament had every right to enact
impugned enactment. While being so, in
appropriate cases, the right to enact a
law with retrospective operation is also
well recognized. In the instant case, on
a perusal of the impugned legislation,
it was given retrospective effect with
effect from 01.02.2021 on the premise
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that it is on the said date, that the
Bill was introduced by the Parliament,
by which, all the assessees and the
general public concerned are made to
know about the policy decision in the
making by which the State proposed to
make the ITSC inoperative. The period of
retrospectivity is also only two months
as it can be seen that the Act itself
was notified on 01.04.2021. It is also
not regarding any levy of tax to contend
that the parties acted as per the law in
force at the relevant time. Therefore,
the act of the State in abolishing the
ITSC with effect from a cut-off date per
se cannot be illegal or ultra vires the
Constitution.
38. But, at the same time, the ITSC did
exist legally and factually until
31.03.2021. Every eligible assessee had
a right to approach the ITSC, if they
had a 'case' pending against them. The
definition of 'case' as per Section 245-
A(eb) is also extracted above.
Therefore, even if any proceeding for
assessments/reopening is issued after
01.02.2021 upto 31.03.2021, the assessee
had a 'case' to approach the Commission
and if they had submitted an application
and if no final order has been passed
under Sub-Section 4 of 245(D) on or
before 31.01.2021, then the said
application is treated as a 'pending
application'. The very purpose of the
legislation was to abolish the ITSC and
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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 (supra) would apply in all force
that a right which had accrued to
approach the ITSC till the notification
of the Finance Act, 2021 on 01.04.2021
stood vested in the eligible assessees
and the said rights continued to be
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capable of being enforced
notwithstanding the amendment of the
relevant provision.
39. As a matter of fact, the
applications are either made by the
petitioners or on direction by the
orders of the Court as the ITSC was in
the statute book in the interregnum
period before the retrospective
legislation came into force. Therefore,
the retrospectivity also makes these
directions of Court and the
consequential applications being filed
before the ITSC nugatory. Therefore, the
ratio in Tushar Ranjan Mohanty quoted
supra applies in all force.
40.At the material time, i.e., during
the interregnum period of 01.02.2021
upto 31.03.2021, the petitioners had a
"case" within the definition of Section
245A(b). Their applications were very
much pending applications as per the
definition of 245A(eb). As a matter of
fact, their applications were dealt with
as per Section 245D and on a perusal of
Section 245M, it can be seen that these
applications were also to be transferred
to the Interim Board to be dealt with in
accordance with the procedure laid down
to the board. But, however, without
amending the definition of case pending
applications etc., Section 245C(5)
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simply provides that no application
shall 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. In this regard,
useful reference can be made to the
Judgment of the Hon'ble Supreme Court of
India in Karnataka State Road Transport
Corpn., -Vs- B.A. Jayaram18, and the
relevant portion of paragraph 17 reads
as follows:-
"17.Even if sub-section (8) of
Section 57 can be viewed as
creating a legal fiction, the
question which would arise would
be for what purpose such legal
fiction was created. As was
observed by Lord 1984 Supp SCC
244 James in Ex Parte Walton,
In re Levy[(1881) 17 Ch D 746,
756 : (1881-85) All ER Rep 548 :
45 LT 1 (CA)] :
"When a statute enacts that
something shall be deemed to
have been done, which in fact
and in truth was not done, the
Court is entitled and bound to
ascertain for what purposes and
between what persons the
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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 sub-section (8) of Section 57 is
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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 application for
variation deemed to be an
application for grant of a new
permit." Therefore, 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 within the
purpose to do away with the 'pending
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applications' in respect of matters
in which the 'cases' arose from
01.02.2021 to 31.03.2021. Thus, we
find that it is just and necessary
to read down the last date mentioned
for filing applications in Section
245C(5) as 31.03.2021 and
consequently the last date mentioned
in paragraph No.4(i) of the Circular
should also read as 31.03.2021. The
Question No.ii is answered
accordingly.
Question No.iii :
41. As per our findings in respect of
Questions No.i and ii, thereby reading
down the statute in respect of the date
as 31.03.2021, the petitioners:(i) 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 as pending applications
for the purposes of consideration by the
Interim Board; (ii) 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
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Government as in respect of the other
cases which arose prior to 31.01.2021.
The Result :
42.In the result, these writ petitions
are partly allowed and are disposed off
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
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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."
25. Therefore adopting the reasons given
in the above decision of the Hon'ble
Madras High Court and more particularly
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
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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
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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.
26. In view of the foregoing reasons 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
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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.
27. Consequential actions to the impugned
orders passed by the Interim Board if any
taken by the respondent Assessing Officer
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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. Rule is made absolute to the
aforesaid extent. No order as to costs.
Sd/-
(BHARGAV D. KARIA, J)
Sd/-
(NIRAL R. MEHTA,J)
URIL RANA
