Draft rehabilitation scheme objections need full particulars before limitation runs; tax concessions cannot bind Revenue without effective hearing.

Under section 19(2) of the Sick Industrial Companies (Special Provisions) Act, 1985, limitation for objecting to a draft rehabilitation scheme did not begin to run where the scheme lacked material particulars needed for meaningful examination, including the basis of proposed tax concessions. The High Court held that the Income-tax Department could not be treated as bound by reliefs and concessions later circulated as part of the sanctioned scheme when it had not been given an effective opportunity to assess their tax implications. The objections were therefore not time-barred, and the circulated scheme was set aside to the extent it compelled revenue concessions, with reconsideration directed after hearing the petitioner.

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Issues: (i) Whether the objections to the draft rehabilitation scheme were barred by limitation under the Sick Industrial Companies (Special Provisions) Act, 1985 despite the absence of requisite particulars and supporting details; (ii) Whether the circulated sanctioned scheme could validly bind the Income-tax Department to grant the stated reliefs and concessions without affording an effective opportunity to consider the tax implications.

Issue (i): Whether the objections to the draft rehabilitation scheme were barred by limitation under the Sick Industrial Companies (Special Provisions) Act, 1985 despite the absence of requisite particulars and supporting details.

Analysis: The statutory period for filing objections presupposes service of a draft scheme that contains sufficient material to enable meaningful examination. Where the scheme does not quantify the expected tax concessions and does not furnish the relevant details required for assessment of the proposal on merits, the period under section 19(2) cannot be treated as running to the prejudice of the objecting department. The absence of necessary particulars prevented an informed response within the prescribed time.

Conclusion: The objections were not barred by limitation in the circumstances, and the petitioner was entitled to contest the scheme.

Issue (ii): Whether the circulated sanctioned scheme could validly bind the Income-tax Department to grant the stated reliefs and concessions without affording an effective opportunity to consider the tax implications.

Analysis: The earlier order sanctioning the scheme did not finally fasten the tax concessions on the department, as the arrangement left the question of reliefs and concessions open to be worked out. The later circulated scheme, however, converted the proposal into a binding direction requiring the department to grant reliefs and concessions, thereby materially affecting its rights. Since the department was adversely affected only by the circulated scheme and had not been given the material needed to assess the concessions, the subsequent order could not stand.

Conclusion: The circulated scheme could not bind the Income-tax Department in the manner directed, and the order to that extent was liable to be set aside.

Final Conclusion: The petition succeeded in challenging the orders to the extent they compelled the Revenue to extend tax reliefs and concessions, and the matter was sent back for reconsideration after giving the petitioner an opportunity to be heard.

Ratio Decidendi: The limitation for objecting to a rehabilitation scheme under section 19(2) does not begin to run until the affected party is furnished with the material particulars necessary for an informed decision, and a scheme cannot be made binding on a tax authority without such effective opportunity.

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