Settlement scheme cutoff cannot operate retrospectively to reject interim applications filed before the amended deadline.

Applications filed between 01.02.2021 and 31.03.2021 under the settlement scheme could not be rejected merely because no case was pending on 31.01.2021. The amended cutoff in Section 245C(5) of the Income-tax Act, 1961 was read down as not operating retrospectively to defeat applications filed during the interim period. The rejection orders and the circular treating such applications as ineligible were therefore inconsistent with that interpretation and were set aside; the applications were to be treated as pending.

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Issues: Whether applications filed between 01.02.2021 and 31.03.2021 under the settlement scheme could be treated as pending applications in view of Section 245C(5) of the Income-tax Act, 1961 as amended by the Finance Act, 2021, and whether orders rejecting such applications for want of a pending case on 31.01.2021 were sustainable.

Analysis: The Court followed the Division Bench decision of the Madras High Court and adopted its reasoning that the amended cutoff in Section 245C(5) could not be applied retrospectively to defeat applications arising during the relevant interim period. The impugned circular and rejection orders, to the extent they treated applications filed between 01.02.2021 and 31.03.2021 as ineligible merely because no case was pending on 31.01.2021, were inconsistent with that interpretation.

Conclusion: The cutoff was read down, the applications were to be treated as pending, and the rejection orders were set aside.

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