2017 (3) TMI 740 - HC - Income Tax

Court extends time for Income Tax Settlement Commission proceedings, sets aside premature abatement order, directs fresh adjudication

The Court held that the Income Tax Settlement Commission prematurely abated proceedings before the six-month period expired. The Court extended the time ... Constitutional validity of provisions of Section 245D(4A) and 245HA - automatic abatement of settlement application if no final order is passed by the Settlement Commission before 31.03.2008 - cause of delay - Held that:- After getting the Principal Bench’s advice on 19.08.2016, earnest attempts were made to reconstruct the files as the matters were very old and records were not readily available with the Principal Bench and thereafter to get comments of both the petitioners and the department. However, the petitioners have delayed sending their comments/counter comments repeatedly. Extension of time for appearance during hearing was also sought, knowing well that the time limit, fixed by Division Bench of this Court was approaching near. Final comments were ultimately furnished by the petitioners on 09.12.2016, just before the limitation date. The department has legitimately sought time to examine the petitioners’ comments and contentions, which cannot be granted in view of the limitation that is expiring on 27.12.2016. The Settlement Commission therefore, squarely blamed the petitioners for the delayed responses and repeated requests for adjournments, which impeded the process of finalization of the matters. However, the Settlement Commission also noted that Pr. CIT has also sought a period of one and a half months to carry out the required verification and observed that this request of the department could not be brushed aside because in view of the principles of natural justice, due opportunity needs to be given to both the parties. Therefore, the Settlement Commission held that even though period of six months fixed by this Court was expiring on 27.12.2016, it was not possible for it to conclude the proceedings by that date and therefore, proceedings in the cases should be taken to have abated. If 27.12.2016, as per computation made by the Settlement Commission, was the date up to which proceedings were to be concluded, there was no occasion for the Settlement Commission to declare the proceedings to have abated one week before that date, i.e. on 19.12.2016, the date on which impugned order was passed. Besides, the facts as noted hereinabove would show that though the petitioners to some extent were also responsible for the delay caused in completion of the proceedings, but it cannot be said that the petitioners alone were guilty of causing such delay because the department was also contributory in prolonging the proceedings for one reason or the other, particularly when it demanded a period of one and a half months, whereas already a week’s time was left before period of six months fixed by Division Bench of this Court would have expired. Therefore, this Court is of the opinion that ends of justice would be met, if the time to conclude the aforesaid proceedings is extended by further three months from today with direction to the parties to produce copy of this order before the Settlement Commission within a period of one week with clear stipulation that the Settlement Commission shall take up the proceedings, if not possible on day to day basis and if not, then on weekly basis and shall not grant undue adjournment to either of the parties and if adjournment is granted then it should be for a maximum period of seven days at one go and the Settlement Commission shall conclude its proceedings within a period of two months and utilize remaining period of three weeks to finalise and frame its final order. Writ petitions are allowed. The impugned order dated 19.12.2016 is set aside. The matter is remitted back to the Settlement Commission for deciding it afresh in accordance with the aforementioned directions. Issues Involved:1. Validity of the order dated 19.12.2016 passed by the Income Tax Settlement Commission.2. Extension of time to complete settlement proceedings.3. Attribution of delay in the settlement proceedings.4. Application of legal precedents and statutory provisions.Detailed Analysis:Validity of the Order Dated 19.12.2016 Passed by the Income Tax Settlement Commission:The petitioners challenged the order dated 19.12.2016 by the Income Tax Settlement Commission, which declined to complete the proceedings and allowed them to abate. The petitioners argued that the Commission unjustifiably observed that adjournments were sought by them, while significant time was lost due to the non-traceability and subsequent reconstruction of the original records. The petitioners contended that the abatement proceedings were not justified.Extension of Time to Complete Settlement Proceedings:The petitioners sought an extension of the time limit prescribed by the Court for adjudicating the Settlement Application. They argued that due to the abatement of proceedings by the Settlement Commission, the Income Tax Department authorities were not proceeding with the regular assessment and had served notice on the petitioners on 04.01.2017. The petitioners relied on the judgment of the Bombay High Court in Star Television News Limited Vs. Union of India, which held that fixing the cutoff date as 31.03.2008 was arbitrary.Attribution of Delay in the Settlement Proceedings:The Settlement Commission noted that the petitioners delayed sending their comments and sought extensions for appearance during hearings, thereby impeding the finalization of the matters. However, the Commission also acknowledged that the Principal Commissioner of Income Tax (Pr. CIT) sought additional time for verification. The Court observed that both the petitioners and the department contributed to the delay, and it was not solely the petitioners' fault.Application of Legal Precedents and Statutory Provisions:The respondents argued that the applications were rightly abated as the Settlement Commission could not decide within the six-month period directed by the Division Bench. They cited the judgment of the Madhya Pradesh High Court in Preeti Goyal Vs. Union of India and the Gujarat High Court in Acron Pharmaceuticals Vs. Union of India, which upheld the statutory provisions for abatement of proceedings if not concluded within the prescribed time. The Court noted that the core issue was whether the time limit for deciding the settlement application could be extended, which had already been addressed by the Division Bench relying on the Supreme Court's judgment in Union of India Vs. Star Television News Limited.Conclusion and Directions:The Court concluded that the Settlement Commission prematurely declared the proceedings abated before the expiration of the six-month period. The Court extended the time to conclude the proceedings by three months from the date of the order, directing the Settlement Commission to take up the proceedings on a day-to-day or weekly basis without granting undue adjournments. The impugned order dated 19.12.2016 was set aside, and the matter was remitted back to the Settlement Commission for fresh adjudication in accordance with the Court's directions.Disposition:The writ petitions were allowed, and the stay applications were disposed of. The office was directed to place a copy of the order on record of the connected writ petition.