2021 (2) TMI 1063 - HC - Income Tax

High Court clarifies time limit for filing under Income Tax Act, emphasizing protection of vested rights

The Gujarat High Court addressed the time limitation for filing a miscellaneous application under Section 254 of the Income Tax Act, 1961. The Court ... Non appearance by assessee - Condonation of delay in filing Rectification application - HELD THAT:- Order, dismissing the appeal for non-prosecution, was passed by the Appellate Tribunal on 12.12.2014 [2014 (12) TMI 1366 - ITAT AHMEDABAD] whereas the Miscellaneous Application was filed on 23rd May, 2017. Appellate Tribunal took the view that with effect from 1st June, 2016, the period of limitation, during which the rectification application can be filed, is six months. Prior to the amendment, it was four years. The argument is that the new law of limitation which came into force with effect from 1st June, 2016, providing for a shorter period, cannot extinguish a vested right of action. In other words, the amendment has been made effective virtually in case of the assessee with retrospective effect. Though the amendment does not show that it is applicable with retrospective effect, however, the existing right has been extinguished with retrospective effect in case of the assessee. Strong reliance has been placed on the decision of the Supreme Court in the case of M./P. Steel Corporation [2015 (4) TMI 849 - SUPREME COURT] and a Division Bench decision of the Madhya Pradesh High Court in the case of District Central Co-op. Banik Ltd.[2017 (10) TMI 691 - MADHYA PRADESH HIGH COURT]. The Madhya Pradesh High Court has relied upon the decision of the Supreme Court in the case of M.P. Steel Corporation (supra).We have thought fit to pass this short order so that the respondent can respond to the same on the next date of hearing. Issues:1. Time limitation for filing a miscellaneous application under Section 254 of the Income Tax Act, 1961.2. Retroactive application of an amendment affecting the period of limitation.3. Interpretation of vested rights in light of legislative amendments.Analysis:The judgment by the Gujarat High Court revolves around the time limitation for filing a miscellaneous application under Section 254 of the Income Tax Act, 1961. The Appellate Tribunal had rejected the application as time-barred, noting that the applicant filed it beyond the prescribed limit. The Tribunal's decision was based on the amendment effective from 1st June, 2016, reducing the filing period to six months from four years. The petitioner argued that this amendment cannot extinguish a vested right of action, essentially claiming that the retrospective effect of the amendment adversely impacts the assessee's rights.The Court delved into the retrospective application of the amendment, drawing parallels from relevant legal precedents. It specifically referenced the Supreme Court's decision in M.P. Steel Corporation vs. Commissioner of Central Excise and a Madhya Pradesh High Court ruling in District Central Co-op. Banik Ltd. vs. Union of India. These cases were pivotal in shaping the Court's understanding of the issue at hand. The Madhya Pradesh High Court's reliance on the Supreme Court's decision further bolstered the argument against the retrospective application of the amendment.In light of the arguments presented, the Court deemed it necessary to provide an opportunity for the respondent to respond to the contentions raised. Consequently, a fresh notice was ordered to be issued to the respondent for final disposal on a specified date. Additionally, the petitioner's counsel was directed to submit the necessary documents to the senior standing counsel representing the respondent. This procedural step aimed to ensure a comprehensive review of the case before reaching a final decision, emphasizing the importance of due process in legal proceedings.