TaxTMI 
TaxTMI 
2011 (8) TMI 944
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....lectively referred to as Outotec Group, filed settlement applications dated 28th June, 2010 under Section 245C of the Income Tax Act, 1961 before the Income Tax Settlement Commission in respect of the Assessment Years 2004-2005 onwards. By three several orders, all dated 2nd July, 2010, the Settlement Commission allowed the applications to be proceeded with. Thereafter, the Settlement Commission forwarded the settlement applications to the Director of Income Tax (International Taxation) under cover of letters dated 6th July, 2010 and called for report under Section 245D (2B) of the Income Tax Act. The settlement applications were filed on 29th June, 2010 and were in respect of the assessment years 2004-05 to 2009-10 and 2005-06 to 2009-10. Mr. Nizamuddin appearing on behalf of the Revenue submitted that the settlement applications were not maintainable, since there were no pending proceedings on the date on which the settlement applications were filed. Mr. Nizamuddin argued that there could be no question of proceedings, where no return had been filed; there was no direction on the assessee to file a return; and the statutory time limit presc....
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....which the assessment is made;] (iv) A proceeding for assessment for any assessment year, other than the proceedings or assessment or reassessment referred to in clause (i) or [clause (iv) of the proviso or clause (iiia) of the Explanation], shall be deemed to have commenced from the 1st day of the assessment year and concluded on the date on which the assessment is made; ................... 245C. [An assessee may, at any stage of a case relating him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the [Assessing] Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commissioner to have the case settled and any such application shall be disposed of in the manner hereinafter provided:- Provided that no such application shall be made unless:- (i) in a case where proceedings for assessment or reassessment for any of the assessment years referred to in clause (b) of sub-section (1) of a perso....
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.... the aggregate of the amount so arrived at in respect of each of the years for which the application has been made under sub-section (1) shall be the additional amount of income-tax payable in respect of the income disclosed in the application. 245F. (1) In addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an income-tax authority under this Act. (2) Where an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall, until an order is passed under sub-section (4) of section 245D, have, subject to the provisions of sub-section (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under this Act in relation to the case:- [Provided that where an application has been made under section 245C on or after the 1st day of June, 2007, the Settlement Commission shall have such exclusive jurisdiction from the date on which the application was made:- Provided further that where:- (i) an application made on or after the 1st day of June,....
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....ected; (b) in respect of an application referred to in clause (ii), the 31st day of July, 2007; (c) in respect of an application referred to in clause (iii), the last day of the month in which the application was declared invalid; (d) in respect of an application referred to in clause (iv), on the date on which the time or period specified in sub-section (4A) of section 245D expires. (2) Where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other income-tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C had been made. (3) For the purposes of sub-section (2), the Assessing Officer, or, as the case may be, other income-tax authority, shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it, as if such material, information, inquiry and evi....
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....n 245A(b) provides that proceedings for assessment other than proceedings for assessment or reassessment referred to in clause (i) or clause (iv) of the proviso or clause (iiia) of the Explanation, are to be deemed to have commenced on the first day of the assessment year and concluded on the date on which the assessment is made. Before the amendment, a case was defined to mean any proceeding under the Income Tax Act for the assessment or reassessment of any person in respect of any year or years, or by way of appeal or revision in connection with such assessment or reassessment, which might be pending before an Income Tax Authority on the date on which an application under sub-section (1) of Section 245C is made. The proviso, as it stood at that time, made it clear that where any appeal or application for revision preferred after the expiry of the period specified for filing of such appeal or application for revision under the Act, had not been admitted, such appeal or revision would not be deemed to be a proceeding pending within the meaning of the said clause. The requirement of furnishing a return of income as a condition precedent for making an ap....
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.... under Section 148 had been issued for any of the assessment years in issue, before the settlement applications were made, the assessees were entitled to apply for settlement before the Settlement Commission, even though no returns had been filed and the time for making assessment under Section 143 had expired. Dr. Pal argued that the Settlement Commission was fully justified in entertaining and proceeding with the settlement application. Dr. Pal also referred to the definition of assessment which included re-assessment. It was argued that once a notice under Section 148 was issued for reopening an assessment, the assessee was required to file a return as if such return were required to be furnished under Section 139 and once such return was filed under Section 148 read with Section 139, all the provisions of the Income Tax Act relating to the making of an assessment would apply including the requirement of issuing notice under Section 143(2) and an assessment would be made thereafter. Section 147 read with Section 149 provides that in case of failure to make a return of income under Section 139, the Assessing Officer can issue notice within a period of six year....
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....od for issuance of notice for proceedings under the aforesaid section. In the case Asgarali Nazarali vs. State of Bombay reported in AIR 1957 SC 503, the Supreme Court held as follows:- "Pending":- (1) A legal proceeding is "pending" as soon as commenced and until it is concluded, i.e., so long as the Court having original cognizance of it can make an order on the matters in issue, or to be dealt with, therein. Similar are the observations of Jessel, M.R. In re Clagett's Estate, Fordham v. Clagett (1):- "What is the meaning of the word "pending"? In my opinion, it includes every insolvency in which any proceeding can by any possibility be taken. That I think is the meaning of the word "pending...... A cause is said to be pending in a Court of justice when any proceeding can be taken in it. That is the test." There is no doubt therefore that the case of the appellant was not concluded and was pending before the learned Presidency Magistrate at the date of the commencement of the impugned Act." In the case of Rambhai Jethabhai Patel vs. CIT reported in 108 ITR 771, the Gujarat High Court held that it could safely be said that a matter....
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....embered that it is not within the human powers to foresee the manifold sets of facts which may arise and even if it were, it is not possible to provide for them in terms free from all ambiguity. The question a Judge should ask himself is to how the makers of the Act would themselves have resolved the ruck? A Judge is not to alter material of which the Act is woven and should have to iron out the creases". Since the legislature has, in its wisdom, very consciously excluded proceedings under Section 147, from the purview of a settlement application, this Court ought not to interpret the expression 'case' in a manner that would in effect bring within the purview of a settlement application, something which has consciously been excluded by the legislature. If two reasonable constructions of a taxing provision are possible, the construction which favours the assessee must be adopted. There can be no dispute with the proposition of law laid down by the Supreme Court in CIT vs. Vegetable Products Ltd. reported in 88 ITR 192 (SC) 195. However, as observed above, literal construction of Explanation iv would give rise to absurdity. This Court meaningfully construes the sa....