2013 (7) TMI 661 - HC - Income Tax

High Court upholds Finance Act amendments on settlement proceedings in Income Tax Act

Vijay Kumar Sultania Versus Union of India & Others

The High Court upheld the amendments made by the Finance Act, 2007 in Chapter XIX-A of the Income Tax Act, 1961, regarding abatement of proceedings for ... Constitutional validity of amendments in Chapter XIX-A made by Finance Act, 2007 - Abatement of settlement application prior to amendment - Held that:- The purported objective of the amendments introduced in Chapter XIX-A by the 2007 Act is to streamline the proceedings before the Settlement Commission and to ensure expeditious disposal of pending cases, the amendments cannot be construed so as to punish an applicant for the inability or failure of the Settlement Commission to dispose of its application within the period specified in section 245D (4A), where such delay in disposal is not attributable to the applicant - An interpretation leading to an unjust, inequitable, harsh and absurd result must be rejected - by reading down the provisions of Section 245D (4A) (i) and Section 245HA (1) (iv) the constitutional validity of the amendments providing abatement of proceedings may be saved and protected from the vice of discrimination, and issue same directions to find out, if the delay is attributable to the applicants before making final order - Following decision of Star Television News Ltd v. Union of India [2009 (8) TMI 86 - BOMBAY HIGH COURT] - Decided in favour of assessee. Issues:Challenge to the amendments made by the Finance Act, 2007 in Chapter XIX-A of the Income Tax Act, 1961 regarding abatement of proceedings for settlement filed before the amendment.Analysis:The petitioner in this case sought directions to declare the amendments made by the Finance Act, 2007 in Chapter XIX-A of the Income Tax Act, 1961 as ultra vires the Constitution of India. The amendments provided that applications for settlement filed before the amendment would abate on 1.4.2008. The petitioner also requested the Income Tax Settlement Commission to decide on the application's merits before 31.3.2008 and exclude all materials from the application for settlement from any proceedings initiated against the petitioner by any Income Tax Authority. An interim order stayed the provision for abatement of proceedings pending before the Settlement Commissioner, clarifying that the pendency of the writ petition would not hinder the Settlement Commission from disposing of the matter in accordance with the law.The judgment delivered in a bunch of writ petitions raised similar questions, citing a case from the Bombay High Court where the amendments were challenged. The Bombay High Court chose to read down the provisions rather than strike them down, aiming to save them from arbitrariness. The High Court emphasized that statutory provisions leading to unjust or absurd results must be interpreted in a manner that aligns with the legislature's intent. The judgment highlighted that the amendments aimed to streamline proceedings and ensure expeditious disposal, not to penalize applicants for delays not attributable to them. The High Court's operative portion clarified the application of sections 245D (4A) and 245HA (1) (iv) to avoid arbitrariness and maintain constitutional validity.The High Court of Jharkhand at Ranchi also relied on the Bombay High Court's reasoning and conclusions, choosing to read down the provisions instead of declaring them unconstitutional. The judgment emphasized the need to consider whether delays in disposal were attributable to the applicants before making final orders. The High Court concluded that by reading down the provisions, the constitutional validity of the amendments providing for abatement of proceedings could be preserved and protected from discrimination. The Settlement Commission was directed to follow guidelines set out in the Star Television News Ltd case when determining if delays were attributable to the applicants.In line with the reasoning and conclusions of previous judgments, this writ petition was disposed of with similar directions, emphasizing the need to consider the attribution of delays to applicants before making final orders.