Petitioners with searches before 31-03-2021 entitled to file Chapter XIX-A settlements under s.132; filings valid until 30-09-2021

Kerala HC held that petitioners whose searches under section 132 occurred before 31-03-2021 remained entitled to file settlement applications under amended Chapter XIX-A and could maintain applications before the Interim Board if filed by 30-09-2021. The court ruled the Explanation clauses left after deletion of provisos cannot restrict the definition of "case," and accepted the CBDT order under section 119(2) permitting filings until 30-09-2021. Orders of the Interim Board declaring such applications as not maintainable were set aside.

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Issues Involved:
1. Eligibility to file applications for settlement under Section 245C of the Income Tax Act, 1961, following the amendments by the Finance Act, 2021.
2. Interpretation of the term 'case' in Section 245A(b) of the Income Tax Act, 1961.
3. Impact of the Finance Act, 2021, on pending applications for settlement.
4. Authority of the Central Board of Direct Taxes to extend the deadline for filing settlement applications.

Issue-wise Detailed Analysis:

1. Eligibility to File Applications for Settlement:
The core issue was whether the petitioners, who were subject to searches under Section 132 of the Income Tax Act before 01-02-2021 but received notices under Section 153A after this date, could file applications for settlement under Section 245C. The Finance Act, 2021, abolished the Income-tax Settlement Commission effective from 01-02-2021, stating no applications could be made post this date. The petitioners argued that the Central Board of Direct Taxes (CBDT) extended the deadline to 30-09-2021, allowing them to file applications. The court concluded that the petitioners were entitled to file applications by 30-09-2021, as the searches occurred before 31-03-2021, and the applications were filed within the extended timeframe.

2. Interpretation of the Term 'Case':
The definition of 'case' under Section 245A(b) was pivotal in determining eligibility for settlement applications. The court examined whether a 'case' was pending from the date of search or from the issuance of a notice under Section 153A. It was determined that a 'case' was pending from the date of the search, thus allowing the petitioners to file applications for settlement. The court emphasized that the deletion of certain provisos and explanations in 2010 and 2014 aimed to broaden the scope of cases eligible for settlement, supporting the petitioners' eligibility.

3. Impact of the Finance Act, 2021, on Pending Applications:
The amendments by the Finance Act, 2021, aimed to abolish the Settlement Commission and establish an Interim Board for pending cases. The court noted that the amendments did not explicitly or implicitly remove the vested right of assessees to file settlement applications for cases pending before 01-04-2021. The court relied on precedents from other High Courts, which held that the right to file applications remained intact until the Finance Act, 2021, came into force on 01-04-2021. Consequently, the court ruled that applications filed before 30-09-2021 were valid.

4. Authority of the Central Board of Direct Taxes:
The CBDT's authority to extend the deadline for filing settlement applications was challenged. The respondents argued that the CBDT could not extend the existence of the Settlement Commission beyond 01-02-2021. However, the court found that the CBDT's extension was valid and allowed applications to be filed until 30-09-2021, aligning with the legislative intent to facilitate settlement of pending cases. The court set aside the Interim Board's orders declaring the applications as not maintainable, directing them to be adjudicated in accordance with the law.

In conclusion, the court ruled in favor of the petitioners, allowing them to maintain applications for settlement before the Interim Board, provided the applications were filed by 30-09-2021, and the searches were conducted before 31-03-2021. The judgment emphasized the legislative intent to expand the scope of settlement mechanisms and upheld the petitioners' rights under the transitional provisions of the Finance Act, 2021.

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