Interim Board must follow earlier Division Bench direction; proceedings deemed commenced before 31 March 2021; AY 2020-21 remitted

HC held the Interim Board's order must conform to the earlier Division Bench judgment; proceedings are deemed to have commenced prior to 31.03.2021. The impugned order insofar as the application for assessment year 2020-21 is set aside and the matter is remitted to the Interim Board for reconsideration in light of the Division Bench direction. The Interim Board is directed to dispose of the proceedings as expeditiously as possible, preferably within three months from receipt of a copy of the order.

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ISSUES PRESENTED AND CONSIDERED

1. Whether an order of the Interim Board for Settlement rejecting an application for assessment year 2020-21 on the ground that the return of income was not filed as on 31.01.2021 is contrary to a Division Bench ruling that read down Section 245C(5) to extend the relevant date to 31.03.2021 and deemed applications arising between 01.02.2021 and 31.03.2021 to be pending.

2. Whether the Explanation to Section 245A (clause (iv)) and the impugned circular paragraph 4(i) must be construed in light of the Division Bench's reading down of Section 245C(5), and whether orders rejecting applications for lack of "pendency" as on 31.01.2021 must be set aside and remitted for fresh consideration.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Applicability of Division Bench reading down of Section 245C(5) to Interim Board decisions

Legal framework: Section 245C(5) (as amended by the Finance Act, 2021) sets temporal eligibility for settlement applications; Explanation to Section 245A (clause (iv)) and the Revenue circular (paragraph 4(i)) specify the last date for eligibility; the concept of "pendency" is pivotal to eligibility.

Precedent Treatment: A Division Bench construed Section 245C(5) by reading down the retrospective last date from 01.02.2021 to 31.03.2021 and directed that applications arising between 01.02.2021 and 31.03.2021 be deemed pending; that decision has been applied in subsequent Division Bench orders.

Interpretation and reasoning: The Court observed that the Division Bench's construction directly affects the determination of "pendency" under the statutory scheme and the circular. Where the Division Bench has held that applications arising up to 31.03.2021 are to be treated as pending, an Interim Board's finding of non-pendency based on the earlier 31.01.2021 datum is inconsistent with that binding construction. The respondent's assertion that the Division Bench judgment may not have been brought to the Interim Board's notice does not cure the legal inconsistency.

Ratio vs. Obiter: The holding that the Division Bench's reading down is applicable to pending Interim Board determinations and that orders rejecting applications for lack of pendency as on 31.01.2021 must be set aside is ratio decidendi as applied in the present context.

Conclusions: The Division Bench's reading down of Section 245C(5) is squarely applicable; the Interim Board's conclusion of no deemed pendency under the Explanation to Section 245A (clause (iv)) is contrary to that binding construction and must be set aside insofar as it concerns assessment year 2020-21.

Issue 2 - Consequences of deeming applications arising between 01.02.2021 and 31.03.2021 to be pending

Legal framework: Where applications are legally "deemed" to be pending for purposes of consideration by the Interim Board, they must be considered on merits in accordance with the statutory scheme and any government-prescribed scheme that applies to pre-31.01.2021 cases.

Precedent Treatment: The Division Bench directed that such deemed-pending applications, if otherwise in order and eligible, be dealt with on merits in accordance with the scheme to be framed by the Central Government, and that prior rejections for lack of pendency be set aside.

Interpretation and reasoning: Given the Division Bench's directive, the Interim Board lacks jurisdiction to refuse consideration solely because a return was not filed by 31.01.2021 for cases arising between 01.02.2021 and 31.03.2021. The proper course is to treat the applications as pending and to consider them on merits under the same procedural and substantive scheme applicable to earlier cases.

Ratio vs. Obiter: The direction to set aside rejections based on non-pendency and to require reconsideration on merits is ratio where applied to an Interim Board's decision that predates or ignores the Division Bench ruling.

Conclusions: Orders rejecting applications for lack of pendency as at 31.01.2021 are to be set aside and the applications remitted to the Interim Board for reconsideration as deemed-pending applications, to be dealt with on merits under the applicable scheme.

Issue 3 - Remedial relief and directions on reconsideration

Legal framework: Courts can set aside administrative orders inconsistent with judicial interpretations of statutory provisions and remit matters for reconsideration in accordance with law; courts may prescribe timelines for expeditious disposal.

Precedent Treatment: The Division Bench earlier directed that affected applications be deemed pending and dealt with; that approach informs the scope of relief the Court may grant to ensure effective implementation.

Interpretation and reasoning: Having found the Interim Board's decision inconsistent with the Division Bench ruling, the Court set aside the impugned order insofar as it concerned assessment year 2020-21 and remanded the matter for fresh consideration in light of the Division Bench's ruling. The Court directed the Interim Board to dispose of the proceedings expeditiously, preferably within three months from receipt of the order.

Ratio vs. Obiter: The remedial direction to set aside and remit for reconsideration, together with an expeditious timeline, constitutes operative ratio as applied to administrative orders inconsistent with higher court interpretations.

Conclusions: The impugned order is set aside insofar as it rejected the application for assessment year 2020-21 for lack of pendency as on 31.01.2021; the matter is remitted to the Interim Board to reconsider the application in light of the Division Bench's reading down of Section 245C(5), with a direction to complete reconsideration preferably within three months.

Cross-References

See Issue 1 for the legal effect of the Division Bench's reading down of Section 245C(5); see Issue 2 for the consequence that applications arising between 01.02.2021 and 31.03.2021 are deemed pending and must be considered on merits; see Issue 3 for the remedial step of setting aside prior rejections and remitting for reconsideration with a timeline.

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