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2017 (9) TMI 825
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....e Tax Act, 1961 ("the Act" for short) inserted by the Finance Act 2007 as ultra vires Article 14 of the Constitution. 2. The petition arises in the following background. The petitioner is an individual. The petitioner's assessments for the assessment years 2001-2002 to 2007-2008 were pending at various original or appellate stages. In order to avail of the benefit of the scheme for settlement of cases provided in Chapter XIXA of the Act, the petitioner applied to the Commission for settlement of cases pertaining to his assessments for the assessment years 2001-2002 to 2007-2008 by filing an application on 28.5.2007. No order on such application was passed under subsection( 1) of section 245D of the Act allowing the application to proceed further before 1.6.2007. 3. By the Finance Act, 2007, significant changes were made in the provisions contained in Chapter XIXA of the Act pertaining to settlement of cases. We would advert to the relevant provisions before and after such amendments at a later stage. At this stage, we may however note that prior to such amendments, the assessee applying for settlement of his case though was required to make payment of tax with interest on....
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....d the vires of amended provisions of Chapter XIXA of the Act. 7. Learned counsel Shri Soparkar for the petitioner with respect to the Constitutionality raised the following contentions : 1) When the petitioner filed the application for settlement, the statute did not envisage payment of additional tax with interest before a specified date and upon the assessee failing to comply with such a condition, the rejection of the application for settlement. Such a condition could not have been imposed with retrospective effect which would amount to taking away a vested right. 2) The amended provisions imposed an onerous condition with no possibility of extending the time for payment of additional tax with interest even in genuine cases of hardship. Such provisions therefore, must be read down as not to be applicable to pending cases. 3) The amended statute now provides that if an application for settlement is rejected or abated, the materials produced by the assessee applicant could be utilised by the Assessing Officer in the assessment proceedings. On one hand, thus the statute imposed a new condition of payment of additional tax with interest before a specifi....
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....latable to each assessment year for which the application for settlement was filed. The payment covered the petitioner's additional tax and interest liability for five out of seven assessment years. For the remaining two assessment years, the petitioner was unable to raise funds for making payment. If at all, therefore, the rejection of the application for settlement could be qua only those years for which additional tax and interest was not paid. Counsel submitted that nothing contained in the Act prevents the assessee from making separate applications for different assessment years. The view taken by the Settlement Commission that the application for settlement was a composite one for all assessment years was therefore, not correct. 6) On the other hand, learned counsel Shri Manish Bhatt for the department opposed the petition contending that the statutory changes were within the powers of the parliament. In order to instill greater seriousness in an assessee pursuing the case for settlement, certain changes were made. Even under the existing provisions, the assessee was always liable to pay additional tax with interest on admitted income. The amended provisions mere....
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....es, on the aforesaid ground the provisions of Section 32F(6) of the Act to the extent it provides that in case Settlement Commission does not pass final order within the period stipulated in the said provision, proceeding shall stand abated, cannot be declared ultra vires the Article 14 of the Constitution of India." 8. Counsel would however agree that in view of the judgment of Bombay High Court in case of Star Television News Ltd. (supra) which was approved by the Supreme Court in case of Union of India v. Star Television News Ltd.(supra), decision of this Court in case of Arcon Pharmaceuticals and anr (supra) was perhaps no longer good law. 9. Shri Bhatt further submitted that the application made by the petitioner was a composite one as the statute itself envisages and requires that the entire application has to be seen as one application for settlement for all assessment years. Such application either be allowed to be proceeded further if condition for payment of additional tax and interest is fulfilled before the specified date or is to be rejected if such condition is not fulfilled. There is no scope for rejecting the application in part for certain number of assessmen....
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....nder subsection( 2D) of section 245D, the additional tax which remained unpaid within the time specified under section (2A) or within the extended time allowed by the Commission under subsection( 2B), the Commission would direct that the amount remaining unpaid with interest be recovered and it will also be open for the Commission to impose penalty for non payment of such amount. Neither section 245D nor any other provisions contained in Chapter XIXA provided for any further consequence of non payment of additional tax and at any rate the statute did not envisage that the settlement application would abate on account of nonpayment. We may notice that under subsection( 1A) of section 245H, if the assessee fails to pay the sum specified by the Settlement Commission in its order under subsection( 4) of section 245D within the specified or extended time, the immunity granted by the Commission from penalty or prosecution be withdrawn. Under section 245J, the amount ordered by the Settlement Commission to be paid under subsection( 4) of section 245D could be recovered by the department in accordance with the provisions contained in Chapter XVII of the Act. 12. There were significant c....
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....ection 245D; or xxx the proceedings before the Settlement Commission shall abate on the specified date. Explanation.-For the purposes of this subsection, "specified date" means- xxx (b) in respect of an application referred to in clause (ii), the 31st day of July, 2007; xxx (2) Where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other incometax 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 subsection (2), the Assessing Officer, or, as the case may be, other incometax 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 evidence had been produced before the Assessing Officer or other incometax authority or....
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....application for settlement itself. In fact, subsection( 1) of section 245C now requires that the applicant would produce the proof of the payment along with the application. For those applications which were made before 1.6.2007, a special provision was made under subsection( 2A) of section 245D granting time upto 31.7.2007 in cases where no order under subsection( 1) of section 245D was passed before 1.6.2007 by providing that if the additional tax on the income disclosed in the application with interest is paid before 31.7.2007, such application shall be deemed to have been allowed to be proceeded further. Newly inserted section 245HA provides for abatement of proceeding before the Settlement Commission. Under clause (ii) of subsection (1) of section 245HA, an application made under section 245C which has not been allowed to be proceeded further under subsection (2A) or further proceeded with under subsection (2D) of section 245D, the proceedings before the Settlement Commission shall abate on the specified date. As per the explanation of the said subsection, specified date in such a case would mean 31st July, 2007. 16. It is not difficult to appreciate that these provisions w....
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....17. We are conscious that the said time limit provisions contained in the amended section 245D of the Act have been explained by the Bombay High Court in case of Star Television News Ltd. (supra) reading down the rigid requirement holding that if the assessee is not responsible for causing delay in disposal of the case, the same would not abate for the Settlement Commission not being able to dispose of the same within the prescribed time. Nevertheless, the legislative intent of bringing a degree of seriousness and promptness in pursuing the settlement cases, would not escape our notice. This is even otherwise an understandable anxiety of the legislature since during the pendency of settlement proceedings, the ordinary assessment would be kept in abeyance. Thus, by mere pendency of an application for settlement before the Commission, the normal assessment mechanism would be kept at bay. The Revenue therefore, would certainly be interested in knowing the outcome of settlement proceedings so that if a case is settled, the ordinary assessment proceedings would be rendered inconsequential. If on the other side, for whatever reason, the application for settlement were to fail, the pendin....
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....e basis. 20. In case of Indian Express Newspapers (Bombay) Private Ltd and others reported in (1985) 1 Supreme Court Cases 641, the Court was examining the validity of a subordinate legislation levying customs duty on imported newsprint. In this context, it was observed that a subordinate legislation may be questioned on the grounds of legislative competence on which the plenary legislation is also subject or being ultra vires the Constitution, as also additional grounds such as, being ultra vires the parent statute or being in conflict with any other statute or being so arbitrary that it could not be said to conform to the statute or violative of Article 14 of the Constitution 21. It was argued that these amendments may act somewhat harshly on the assessees and particularly when such amendments are applied to pending applications for settlement, the same would be arbitrary. It is well settled that the statute cannot be declared as unconstitutional merely because it is likely to work harshly against some sections of the citizens. Merely because those who have already applied for settlement are now asked to pay the additional tax on income disclosed in the settlement applicati....
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....ding cases in accordance with the provisions of the Act, to utilise all the material and other information produced by the assessee before the Commission as well as the material collected through inquiry during the course of such settlement proceedings or evidence recorded by the Commission. Effectively, this would transpose the material before the Commission, collected till the proceedings reached the stage of abatement before the incometax authority, who would be entitled to use the same. 23. It is not even the case of the petitioner that earlier there was any provision which prohibited the Assessing Officer or the incometax authority from accessing such information and utilising the same in the course of completion of pending cases, to which the settlement proceedings related. All that perhaps materially changed is that insofar as the material, other information produced by the assessee before the Commission is concerned, it would partake the character of the same having been produced by the assessee before the Assessing Officer or the incometax authority. Surely, no assessee can claim immunity from use of such material unless such immunity was granted in specific terms of st....
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....to apply for settlement in a particular assessment proceeding after he had opted to apply for settlement in case of another assessment year. There is nothing to suggest in the then existing statute to prevent or prohibit such applications at the hands of the same assessee. It was thus always open for the assessee to apply separately for settlement of different cases. Though the prescribed format in which such application is to be filed refers to one common application for multiple years, the vital details to be provided such as the admitted income, additional income disclosed, tax payable on such income is to be provided assessment year wise. In any case, the printed proforma cannot govern the true interpretation of the statute. 25. The eligibility of an assessee to file separate applications for settlement must be seen in light of the subsequent statutory changes with effect from 1.6.2007 by which the legislature cast a duty on the applicant who had already applied for settlement to pay the additional tax with interest on income disclosed before the Settlement Commission latest by 31.7.2007. These amendments brought in two major changes. First was that in all pending applicatio....