2022 (2) TMI 229 - HC - Income Tax

Court upholds decision to quash Settlement Commission order due to limitation period violation

THE COMMISSIONER OF INCOME TAX (CENTRAL), THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2 (3), BENGALURU Versus M/s RNS INFRASTRUCTURE LIMITED, THE INCOME TAX SETTLEMENT COMMISSIONER

The Court dismissed the Revenue's writ appeal, upholding the learned Single Judge's decision to quash the Settlement Commission's order dated 27.05.2016 ... Validity of Settlement Commission order - Order beyond the limitation prescribed u/s 245D(4A)(iii) and by operation of Section 245HA(1)(iv) - Non-disposal of the applications within the cut-off period - revenue submitted that the writ Court committed an error in deciding the writ petition on merits sans issuing notice to the Settlement Commission, more particularly when statement of objections was filed by the appellants only to the interim prayer sought and the arguments were heard only on the interim prayer - whether order of the learned Single Judge is in violation of principles of natural justice since no reasonable opportunity was provided to the appellants to address the arguments on the merits of the case? - Single Judge reaching a conclusion that the said order was abated and as such, the Settlement Commission ought to have entertained the rectification application filed by the assessee - HELD THAT:- The said judgment of Star Television News Ltd.,[2009 (8) TMI 86 - BOMBAY HIGH COURT]is not applicable to the applications filed subsequent to 01.06.2007 before the Settlement Commission. Indisputably, in the case on hand, the application was filed by the respondent No.1 – assessee before the Settlement Commission after 01.06.2007. As could be seen from the material on record, it is discernable that the Revenue has approached this Court challenging the order of the Settlement Commission dated 03.04.2014 passed under Section 245D(2)(c) but failed to take the matter to the logical end. Writ Appeal were withdrawn and now the final order dated 27.05.2016 passed by the Settlement Commission is supported by the Revenue whereas the assessee has challenged the same in the present proceedings. Learned Single Judge has meticulously arrived at a decision on marshalling the facts of the case vis-à-vis considering the ruling of Star Television News Ltd., supra, with the relevant provisions applicable to the facts of the present case. Revenue has also placed reliance on the ruling of the Hon’ble High Court of Gujarat in M. Kantilal and Co. vs. Income Tax Settlement Commission.[2018 (7) TMI 463 - GUJARAT HIGH COURT]and M. Kantilal and Exports vs. Income-tax Settlement Commission[2018 (7) TMI 49 - GUJARAT HIGH COURT] wherein the applicants have approached the Hon’ble High Court of Gujarat contending that by virtue of operation of the statutory provisions, their settlement applications would likely to abate shortly for no fault of them. Admittedly, the applications were filed by the assessee before the Settlement Commission in those cases prior to 01.06.2007. In that scenario the Hon’ble High Court of Gujarat considering the case of Star Television News Ltd., supra, has held that the order of the Settlement Commission in disposing of the proceedings as having abated is unjustifiable. The other grounds urged by the Revenue inasmuch as non-providing of reasonable opportunity etc., cannot be countenanced for the reason that the learned ASG has appeared for respondent No.1 - assessee and argued the matter in extenso. Considering the arguments of both sides, the learned Single Judge has proceeded to decide the writ petition. In the circumstances, we find no jurisdictional error in the order of the learned Single Judge in allowing the writ petition filed by the assessee. Issues Involved:1. Validity of the Settlement Commission's order dated 27.05.2016.2. Applicability of the decision in Star Television News Ltd. vs. Union of India.3. Alleged violation of principles of natural justice by the learned Single Judge.4. Limitation period for passing orders by the Settlement Commission under Section 245D(4A) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Validity of the Settlement Commission's order dated 27.05.2016:The respondent-assessee filed an application before the Income Tax Settlement Commission under Section 245C of the Income Tax Act, 1961, which was declared valid by the Commission on 03.04.2014. The Settlement Commission was required to pass an order within 18 months from the end of the month in which the application was made, i.e., by 10.12.2015. However, the order was passed on 27.05.2016. The respondent-assessee's application for rectification of this order was rejected, leading to the filing of writ petitions which were allowed by the learned Single Judge, quashing the Settlement Commission's orders. The appeal by the Revenue challenging this decision was dismissed, affirming that the Settlement Commission's order was beyond the prescribed limitation period.2. Applicability of the decision in Star Television News Ltd. vs. Union of India:The Revenue cited the case of Star Television News Ltd. to argue that the limitation period under Section 245D(4) is directory, not mandatory. However, the Court noted that the Star Television case dealt with applications made before 01.06.2007, whereas the current case involved an application made after this date. The Court emphasized that the decision in Star Television News Ltd. was specific to the context of applications pending before 01.06.2007 and was not applicable to the present case. The Court upheld the learned Single Judge's interpretation that the Settlement Commission’s order was abated due to being passed beyond the statutory period.3. Alleged violation of principles of natural justice by the learned Single Judge:The Revenue contended that the learned Single Judge violated principles of natural justice by deciding the writ petition on merits without issuing notice to the Settlement Commission. However, the Court found that the learned ASG had appeared and argued extensively on behalf of the assessee, and both sides were given an opportunity to present their arguments. Therefore, the Court concluded that there was no jurisdictional error or violation of natural justice in the learned Single Judge's order.4. Limitation period for passing orders by the Settlement Commission under Section 245D(4A) of the Income Tax Act, 1961:The Court examined Section 245D(4A) which mandates that the Settlement Commission must pass orders within 18 months from the end of the month in which the application was made. The Court reiterated that in this case, the Settlement Commission failed to pass the order within the stipulated time frame, making the order dated 27.05.2016 invalid. The Court also referenced the ruling of the Hon'ble High Court of Bombay in Star Television News Ltd., which held that the cut-off date for disposing of applications should be adhered to unless the delay is attributable to the applicant, which was not the case here.Conclusion:The Court dismissed the Revenue's writ appeal, finding no merit in the arguments presented. The Settlement Commission's order dated 27.05.2016 was quashed due to being passed beyond the statutory limitation period, and the applicability of the Star Television News Ltd. case was deemed irrelevant to the present facts. The decision of the learned Single Judge was upheld, confirming the abatement of the Settlement Commission's order.