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2017 (9) TMI 849
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....ceedings before the Settlement Commission was completed on 8.11.2006 and the proceedings were pending for final order to be passed by the Settlement Commission. 3. When the proceedings were thus pending before the Commission, certain amendments were made in Chapter XIXA of the Act pertaining to settlement of cases. The amendments relevant for our purpose were that the assessee who had applied for settlement would pay the additional tax and interest on the income disclosed before the Settlement Commission on 31.7.2007. Instead of the assessee's responsibility to pay the same for which the statute did not provide any final time limit, the statute now provided for abatement of the settlement proceedings if such amount was not paid within the prescribed time. As per subsection( 3) of section 245HA which was newly inserted, the material produced by the assessee before the Settlement Commission and that collected by the Settlement Commission through inquiries pending the settlement proceedings and the evidence brought on record could be utilised by the Assessing Officer or the incometax authority in proceeding further with the pending cases, once the proceedings before the Settlem....
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....n awaiting the order u/s245D(4). We request that the orders passed in the settlement application be forwarded to us at an early date. 4. In the circumstances, the present notice of hearing, it appears has been issued wrongly." 6. The Settlement Commission passed the impugned order dated 11.12.2007 by which the Commission declared that the proceedings had abated due to non compliance by the petitioner with the provisions of section 245D(2D) of the Act and the Assessing Officer would now dispose of the case in accordance with the provisions of subsections 2, 3 and 4 of section 245HA. It is in this background the petitioner has challenged the said order of Settlement Commission. In the alternative, the petitioner prayed that the material produced before the Commission should not be allowed to be used by the incometax authorities. We may notice that the petitioner has not challenged the vires of any of the statutory provisions contained in the Finance Act, 2007. We had in a separate judgment passed today had an occasion to consider the vires of these very amendments applicable in the present case including subsection( 3) of section 245HA. We had upheld the vires making the ....
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....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 changes in these statutory provisions with effect from 1.6.2007. Under subsection( 1) of section 245C, now the assessee applying for settlement of his case, would pay the additional tax and interest on the income disclosed in the application for settlement. Proof of payment would be attached with the application itself. Though certain changes have been introduced also in subsections 1A to 1D of section 245C pertaining to computation of additional tax and interest, we are not directly concerned with such changes. Requirement of payment of additional tax with interest within the prescribed time, failure of which would result into abatement of the proceedings before the Settlement Commission, was introduced by way of the newly inserted subsection( 2A) of section 245D of the Act read with clause(ii) of subsection( 1) of section 245HA of the Act. Under subsection( 3) of section 245HA, upon abatement of the proceedings before the Settlement Commission when the Assessing Officer proceeds to dispose of ....
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....he 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 held or recorded by him in the course of the proceedings before him." 13. The comparison of the statutory provisions before and after amendment with effect from 1.6.2007 would show that even earlier the assessee always had a liability to pay the tax on additional income disclosed in the application for settlement filed before the Commission. Such liability would be discharged within thirtyfive days of the receipt of a copy of the order under subsection( 1) of section 245D. It was ofcourse open for the assessee to apply to the Settlement Commission for extension of time or installments by making out good or sufficient reasons for being unable to pay the same within the prescribed time. Whether such extension was granted or not, in terms of subsection( 2C) of section 245D, the assessee would be liable to pay interest on the amount of tax which remained unpaid after completion of prescribed period. The Settlement Commission could also direct payment of tax with interest or even impose penalty on the asses....
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....ate 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 were brought into the statute to bring in a greater seriousness and in order to ensure that the applications for settlement are pursued with due care and promptness. In this context, we may also notice some of the other changes simultaneously made in the said chapter. For example, in the substituted subsection (1) of section 245D, the legislature introduced the concept of extremely short time limits for crossing the first stage of allowing or not allowing an application for settlement to be proceeded further. Under this provision, on receipt of an application under section 245C, the Settlement Commission within seven days from the date of receipt of the application, shall issue a notice to the applicant requiring him to explain why the application should be allowed to be proceeded with. After hearing the applicant, the Settlement Commission would within fourteen days from the date of the application, either reject or allow the application to be proceeded with. As per proviso to subsec....
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....ceedings 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 pending assessment would revive and be continued from whatever stage it was pending. The statutory provisions under challenge before us therefore, must be seen in light of the over all relevant changes made by the legislature and the ultimate effect of such changes in the settlement proceedings. 18. The parameters for testing the constitutionality of the legislation made by the parliament or the State legislature are well laid down in series of judgments of the Supreme Court and this Court. Two of the grounds on which such legislation can be called in question are that the legislature lacks the competence to frame the law or that the statutory provision is opposed to the fundamental rights enshrined under the Constitution or any other constitutional provision. It is in fact, within these two grounds of challenge to a statute, the Supreme Court in case of Shayara Bano (supra) has expanded to a limited extent the scope of examination, propounding that the legislation can also ....
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.... 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 application before a certain date, by itself would not render the statute arbitrary. This would be for multiple reasons. Firstly, the tax being collected is on the admitted income, the income which the assessee had not disclosed in the original return filed before the Assessing Officer but which he now admits in the application for settlement filed before the Commission. No tax payer can claim liberty from payment of tax on an admitted income. Secondly, even in the provisions prevailing upto 1st June 2007, there was always the liability of the assessee applying for settlement to pay the additional tax on the income disclosed. If he failed to pay the sum within the prescribed time, he would have to pay the tax along with interest at the prescribed rate. We are conscious that the provision for abatement of settlement proceedings before the Commission, upon the assessee not being able to pay the sum by 31st July 2017, was newly introduced. However, the applicant bef....
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....ke 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 statute. No assessee can claim that he made a certain declaration before the Commission which was true but should not be utilised by the incometax authority for the purpose of his assessment. Even while filing a return before the Assessing Officer and participating in the assessment proceedings, be it before the Assessing Officer or at the appellate stage, there is inherent duty of every assessee to make true and full disclosures. In our opinion therefore, the newly inserted subsection( 3) of section 245HA did not take away any vested right hitherto enjoyed by the assessee. In the result, the challenge to the vires of the statutory provisions must fail." 7. Shri Soparkar however submitted that the Settlement Commission did not dispose of the proceedings for a long time after conclusion of the hearing, as a result of which the liability to pay additional tax before 31.7.2007 arose. Had the Settlement Commission disposed of the proceedings pro....