HC quashes IBS rejection of settlement application under Section 245D(4), directs reconsideration with all objections preserved

The HC quashed the IBS order dated 29 August 2023 rejecting petitioner's settlement application under Section 245D(4). The court held that the application should be considered by IBS, keeping open all revenue objections including threshold limits under Section 245C(1)(ia). The rejection was found to be covered by precedents in Sar Senapati and Vishwakarma Developers cases. The court did not examine constitutional validity challenges, keeping petitioner's contentions open. The writ petition was disposed of without costs, directing IBS to reconsider the settlement application while preserving all parties' rights to raise jurisdictional and other objections.

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Issues Involved:
1. Eligibility of the petitioner's settlement application under Section 245D(4) of the Income Tax Act, 1961.
2. Validity of the CBDT's order dated 28 September 2021 under Section 119(2)(b) of the Income Tax Act.
3. Applicability of the threshold limit under the first proviso to Section 245C(1) of the Income Tax Act.
4. Jurisdictional issues related to the assessment years and amounts involved.

Detailed Analysis:

1. Eligibility of the Petitioner's Settlement Application:
The petitioner challenged an order dated 29 August 2023 passed by the Interim Board for Settlement (IBS) under Section 245D(4) of the Income Tax Act, 1961. The IBS rejected the petitioner's application dated 15 March 2021 as not maintainable due to non-fulfillment of requirements under the order dated 28 September 2021 issued by the CBDT under Section 119(2)(b) of the Act. The IBS noted that for eligibility to file a settlement application, proceedings under Section 153A/153C should have commenced as on 31 January 2021. Since the return of income for AY 2020-21 was filed on 10 March 2021, the application was deemed ineligible.

2. Validity of the CBDT's Order Dated 28 September 2021:
The petitioner argued that the conditions set out in the CBDT's order dated 28 September 2021 were ultra vires of the parent Act. The court referred to its previous decisions in Sar Senapati Santaji Ghorpade Sugar Factory Ltd. and Vishwakarma Developers, where it was held that the additional eligibility conditions imposed by the CBDT were beyond its powers under Section 119 of the Act. The court observed that there was no provision in the Act empowering the CBDT to impose such eligibility conditions and declared the relevant parts of the CBDT's order invalid and bad in law.

3. Applicability of the Threshold Limit under the First Proviso to Section 245C(1):
The IBS also rejected the petitioner's applications for AY 2014-15 to 2019-20 because the total additional tax payable did not meet the benchmark of fifty lakh rupees, a prerequisite condition under the first proviso to Section 245C(1) of the Act. The court noted that the total tax payable for these years was Rs. 43,64,291, which was below the minimum prescribed limit.

4. Jurisdictional Issues Related to Assessment Years and Amounts Involved:
The respondents raised a contention under Section 245C(1)(ia) of the Act, arguing that the petitioner's settlement application was not maintainable when considering the assessment years and amounts involved by bifurcating the amounts in respect of the search years and non-search years. The court opined that this contention should be addressed by the IBS as it pertains to jurisdictional issues. The court focused on the limited issue of the rejection of the settlement application based on the conditions in the CBDT's order, which was already covered by previous decisions.

Conclusion:
The court quashed and set aside the impugned order dated 29 August 2023 passed by the IBS, holding that the petitioner's application should be considered by the IBS. All objections and contentions of the revenue, including those related to the threshold limits under the first proviso to Section 245C(1), were kept open. The court did not examine the constitutional validity of the relevant provisions, keeping all contentions of the petitioner open. The other petitions were disposed of on similar terms.

Operative Order:
(i) The impugned order dated 29 August 2023 passed by the IBS is quashed and set aside.
(ii) The petitioner's application is to be considered by the IBS, with all objections/contentions of the revenue kept open.
(iii) The petitioner's challenge to the constitutional validity of the provisions is not examined, and all contentions are kept open.
(iv) Writ Petition (L.) No. 3128 of 2024 is disposed of in the aforesaid terms, with no costs.
(v) Writ Petition (L.) No. 13641 of 2024 and Writ Petition (L.) No. 20430 of 2024 are disposed of on similar terms, with no costs.
(vi) Rule is made absolute in the aforesaid terms, with no costs.

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