Income tax settlement commission application filed March 2021 remains valid despite Finance Act retrospective provisions under Section 245C(5)

Bombay HC held that an income tax settlement commission application filed on 18th March 2021 was valid despite subsequent legislative changes. The court ruled that retrospective provisions of Finance Act 2021's Section 245C(5) prohibiting applications after 1st February 2021 could only take effect after presidential assent, not retrospectively invalidate already-filed applications. The CBDT notification restricting eligibility to those qualified by 31st January 2021 was quashed as ultra vires, exceeding statutory provisions. The court emphasized that retrospective legislation cannot affect vested rights and directed the application be considered according to law.

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Issues Involved:
1. Validity of the application filed before the Settlement Commission.
2. Retrospective applicability of sub-section (5) in Section 245C of the Income Tax Act, 1961.
3. Legality of the Press Release dated 7th September 2021 and the notification dated 28th September 2021.

Summary:

1. Validity of the Application Filed Before the Settlement Commission:
The petitioner, a company engaged in manufacturing and trading in sugar, ethanol, and power, challenged the notice dated 16th September 2021 issued by the Assistant Commissioner of Income Tax, which stated that the petitioner was not eligible to file an application before the Settlement Commission. The petitioner had filed an application u/s 245C on 18th March 2021. The Court held that the application was valid as it was filed before the Finance Act, 2021 was notified on 1st April 2021. The Court referenced the decision of the Madras High Court in Jain Metal Rolling Mills vs. UOI, which held that the eligibility condition should be read as 31st March 2021 and not 31st January 2021. Therefore, the notice dated 16th September 2021 was quashed and set aside.

2. Retrospective Applicability of Sub-section (5) in Section 245C:
The Finance Act, 2021 inserted sub-section (5) to Section 245C, which prohibited filing applications on or after 1st February 2021. The Court held that this provision could not affect applications filed before the Finance Act, 2021 was notified on 1st April 2021. The Court stated, "The words 'shall be made' can only be interpreted as having effect from the date of its notification and cannot apply from an earlier date." Thus, the application filed by the petitioner on 18th March 2021 was deemed valid and could not be invalidated by the retrospective amendment.

3. Legality of the Press Release and Notification:
The Press Release dated 7th September 2021 and the notification dated 28th September 2021 restricted eligibility to file applications before the Interim Board to those who were eligible as of 31st January 2021. The Court held that these conditions were beyond the scope of the powers of the CBDT u/s 119 of the Act. The Court stated, "There is no provision in the Act providing a cut-off date with respect to an assessee being eligible to make an application under Section 245C of the Act." Therefore, the impugned notification and Press Release were held invalid to the extent they imposed the additional condition of eligibility as on 31st January 2021.

Conclusion:
The Court quashed the notice dated 16th September 2021 and held the notification dated 28th September 2021 invalid to the extent it imposed additional eligibility conditions. The petitioner's application filed on 18th March 2021 was deemed valid and was to be considered and disposed of in accordance with the law.

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