2016 (9) TMI 296 - HC - Income Tax

Court reinstates petitioner's settlement application, rejecting Income Tax Commission's order. CBDT Circulars don't override judicial decisions.

Yashovardhan Birla Versus Deputy Commissioner of Income Tax, Central Circle 4 (1) and 3 Ors.

The court quashed the Income Tax Settlement Commission's order dismissing the petitioner's settlement application, reinstating the application for ... Jurisdiction of the Commission to entertain a settlement application - Held that:- The declaration of law by this Court is binding on all authorities within the State including the Commission. The petitioner was entitled to proceed on the basis that till the service of the assessment order, the case continues to be pending with the Assessing Officer. Therefore, it was open to him to invoke the provisions of Chapter XIXA of the Act on 30th March, 2016 as till that date the assessment order was not served upon him. Moreover, the petitioner brought to our notice that even the Commission had on its website represented that an application for settlement could be filed with it, till such time the assessment order is served upon the petitioner. By this representation under caption F.A.Q., the Commission admittedly held out that an application for settlement would be accepted till service of the assessment order. Admittedly, this representation was made till the impugned order was passed on 12th April, 2016. We find that in the present facts, the petitioner was entitled to act upon the above representation. It is not fair for the State to now take up the stand that on the proper interpretation of the provisions of law, the representation made by it is not in accordance with law. At the very highest, even according to the Revenue, the issue is not clear as it is subject to interpretation, at the very least, therefore, the Commission must be held bound by its representation. As it was its understanding on interpretation of Chapter XIX A of the Act. In any case, the petitioner could not be prejudiced for acting in terms of the representation. We are informed that the above representation is withdrawn by the Commission post 12th April, 2016. Therefore, on the above ground also in the present facts, the impugned order is not sustainable. The impugned order dated 12th April, 2016 of the Commission being Exh.G. to the petition is quashed and set aside. The application for settlement is restored to the file of the Commission at the stage of 245D(1) of the Act. The period of 14 days as provided in Section 245D(1) of the Act, will run from the date this order is first communicated by either of the parties to the Commission. Issues Involved:1. Jurisdiction of the Income Tax Settlement Commission to entertain a settlement application.2. Interpretation of the term 'pending assessment' under Section 245A(b) of the Income Tax Act, 1961.3. Validity of the Commission's rejection of the settlement application based on the timing of assessment order issuance versus service.4. Binding nature of the Commission's representations on its website.5. Impact of CBDT Circulars on the interpretation of statutory provisions.Issue-wise Detailed Analysis:1. Jurisdiction of the Income Tax Settlement Commission to entertain a settlement application:The petition challenges the order dated 12th April 2016, passed by the Income Tax Settlement Commission (the Commission) under Section 245D(1) of the Income Tax Act, 1961 (the Act). The Commission dismissed the petitioner's application for settlement for Assessment Years 1989-99 to 2014-15. The core dispute is whether the assessment was pending when the application for settlement was filed, which affects the Commission's jurisdiction to entertain the application.2. Interpretation of the term 'pending assessment' under Section 245A(b) of the Income Tax Act, 1961:The critical question is when an assessment can be considered 'pending' for the purposes of Chapter XIX A of the Act. The petitioner argues that an assessment remains pending until the assessment order is served on the assessee, as supported by the decision in Commissioner of Income Tax Vs. Income Tax Settlement Commission & Anr. 375 ITR 483 (ITSC). The Revenue, however, contends that an assessment is concluded when the assessment order is made, irrespective of its service.3. Validity of the Commission's rejection of the settlement application based on the timing of assessment order issuance versus service:The petitioner filed the application for settlement on 30th March 2016, arguing that the assessments were pending as the orders were not served until 31st March 2016. The Commission rejected the application, stating that the assessments were not pending as the orders were made on 30th March 2016. The court found that the principle laid down in ITSC (supra) is binding, which states that an assessment order is made when it is served. Therefore, the Commission erred in rejecting the application based on the issuance date rather than the service date.4. Binding nature of the Commission's representations on its website:The petitioner relied on the Commission's website, which stated that an assessment is pending until the order is served. The court held that the petitioner was entitled to rely on this representation, and the Commission is bound by it. The Commission's subsequent withdrawal of this representation does not affect the petitioner's rights based on the earlier representation.5. Impact of CBDT Circulars on the interpretation of statutory provisions:The Revenue cited CBDT Circular No. 16 of 2014, which states that an assessment is completed when the order is passed, not when it is served. The court held that a CBDT Circular cannot override a judicial decision. The Circular was available when the ITSC decision was made, and it does not seem to have influenced the court's decision. The court reiterated that a Circular is binding on Revenue officers only when it is beneficial to the assessee.Conclusion:The court quashed and set aside the Commission's order dated 12th April 2016, restoring the petitioner's application for settlement to the stage of Section 245D(1) of the Act. The period of 14 days provided in Section 245D(1) will run from the date this order is first communicated to the Commission. The petition was disposed of with no order as to costs.