Challenged Provisions in Income Tax Act Upheld, Partial Petition Success

The court upheld the constitutionality of the challenged provisions in the Income Tax Act, 1961, regarding settlement applications. The court allowed the petition partially, setting aside the abatement of the application for specific assessment years due to non-payment of additional tax and interest. The application was revived for the remaining assessment years, directing disposal by the Settlement Commission in accordance with the law.

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Issues Involved:
1. Constitutionality of sections 245D(2A), 245D(2D), and 245HA of the Income Tax Act, 1961.
2. Abatement of the petitioner’s application for settlement due to non-payment of additional tax and interest.

Issue-Wise Detailed Analysis:

1. Constitutionality of Sections 245D(2A), 245D(2D), and 245HA:
The petitioner challenged the constitutionality of sections 245D(2A), 245D(2D), and 245HA of the Income Tax Act, 1961, on the grounds that these amendments imposed onerous conditions with retrospective effect, violating Article 14 of the Constitution. The petitioner argued that:
- The amendments introduced a condition of payment of additional tax and interest before a specified date, which did not exist when the application was filed, thus taking away a vested right.
- The amendments did not allow for extensions or installments in cases of genuine hardship.
- The amendments allowed the use of materials produced before the Settlement Commission by the Assessing Officer if the application for settlement was rejected or abated.

The court noted that the amendments aimed to instill greater seriousness and promptness in pursuing settlement cases. The court referred to the judgment in "Star Television News Ltd. v. Union of India" where similar provisions were read down to prevent abatement due to reasons not attributable to the applicant. The court held that:
- The amendments did not take away any vested rights as the liability to pay additional tax on the disclosed income always existed.
- The provisions were not arbitrary as they aimed to ensure prompt payment of taxes on admitted income, which is a reasonable legislative objective.
- The use of materials produced before the Settlement Commission by the Assessing Officer was not arbitrary as it did not take away any vested right and was consistent with the duty of the assessee to make true and full disclosures.

2. Abatement of the Petitioner’s Application for Settlement:
The petitioner’s application for settlement was declared abated due to non-payment of additional tax and interest by the specified date (31.7.2007). The petitioner contended that:
- Due to financial difficulties, they could not make full payment and requested an extension.
- The application should not abate in its entirety but only for those assessment years for which payment was not made.

The court held that:
- The Settlement Commission correctly concluded that it did not have the power to extend the time for payment as per the amended provisions.
- The petitioner’s request to limit the abatement to specific assessment years was justified. The court observed that the statutory provisions did not prohibit filing separate applications for different assessment years and that the petitioner had paid the additional tax and interest for five out of seven assessment years.

Judgment:
The court allowed the petition in part. The impugned order declaring the entire application as abated was set aside to the extent that the abatement would apply only to the assessment years 2004-2005 and 2006-2007 for which payment was not made. The application for the remaining assessment years was revived and directed to be disposed of by the Settlement Commission in accordance with law.

Conclusion:
The court upheld the constitutionality of the challenged provisions and provided relief to the petitioner by limiting the abatement of the settlement application to specific assessment years. The petition was disposed of accordingly.

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