Settlement applications filed after 31.01.2021 remain eligible despite assessment orders during interregnum period under section 245F(2)

Gujarat HC held that settlement applications filed after 31.01.2021 remain eligible for consideration by the Interim Board despite assessment orders being passed during the interregnum period. The court ruled that once a settlement application is pending before the Settlement Commission/Interim Board, the Income Tax authority loses jurisdiction to proceed with assessment proceedings under section 245F(2). Assessment orders passed by the respondent in July 2021 for assessment years 2013-14 to 2019-20 were declared non-est and quashed. The Interim Board's rejection order was also set aside, and the matter was remanded for fresh consideration on merits.

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Issues Involved:
1. Validity of the assessment orders passed by the Respondent No. 3.
2. Jurisdiction of the Interim Board to adjudicate the settlement application.
3. Application of Circular dated 28.09.2021 issued by the CBDT.

Summary:

1. Validity of the Assessment Orders:
The petitioner filed a petition under Articles 226 and 227 of the Constitution of India to quash the assessment orders passed by the Respondent No. 3 on 27.07.2021 for the Assessment Years 2013-14 to 2018-19. The petitioner argued that the assessment orders were passed despite the pendency of a settlement application filed on 30.03.2021. The court held that the assessment orders passed by Respondent No. 3 are non-est and would not survive as they were passed during the pendency of the settlement application before the Interim Board, which had exclusive jurisdiction over the case as per section 245F(2) of the Income Tax Act, 1961.

2. Jurisdiction of the Interim Board:
The petitioner contended that the Interim Board, constituted under section 245AA, has all the powers of the Settlement Commission to adjudicate pending applications after 01.02.2021. The court observed that the Interim Board is vested with the powers of the Settlement Commission and has exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under the Act in relation to the case. Therefore, the assessment orders passed by the Income Tax authorities during the pendency of the settlement application were invalid.

3. Application of Circular dated 28.09.2021:
The petitioner argued that the application filed on 30.03.2021 should be considered a valid and pending application as per the CBDT Circular dated 28.09.2021. The circular allowed taxpayers who were eligible to file applications for settlement on 31.01.2021 to file such applications by 30.09.2021. The court agreed with the petitioner, stating that the application filed by the petitioner is a valid application and should be treated as a pending application for adjudication on merits.

Conclusion:
The court quashed the impugned assessment orders passed by Respondent No. 3 and the order passed by the Interim Board. The matter was remanded back to the Interim Board to decide the settlement application treating it as a pending application as per the CBDT Circular dated 28.09.2021. The Interim Board is directed to adjudicate the application on merits and pass an order under section 245D(4) of the Act after giving both parties an opportunity to be heard. The petition was allowed, and the rule was made absolute to the aforesaid extent.

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