TaxTMI 
TaxTMI 
TaxTMI 
2017 (9) TMI 849
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....as 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 Settlement Commission abates. 4. Since the settleme....
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....tion 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 following observations : "11. Prior to 1.6.2007 amendment, there was no requirement for an assess....
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....rovisions 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 the pending cases, the Assessing Officer or other incometax authority would be entitled to use material and othe....
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....rse 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 assessee not paying the same. The statutory provisions however, did not provide for abatement of proceedings if the assessee failed to make payment of tax or interest nor would the Settlement Commission refuse to dispos....
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....o 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 subsection (1) if no order has been passed within the said period by the Settlement Commission, the application shall be deemed to have been allowed to be proceeded further. Thus, the first threshold examination of the application under s....
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....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 be struck down on the ground of arbitrariness. Nevertheless, the concept of arbitrariness in context of testing a statutory provision made by the parliament or the State legislature cannot be put in a golden scale. If the legislature in its wis....
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....tself 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 before the Settlement Commission cannot claim vested right to have the application granted and seek immunity from penalty and prosecution even while continuing to be in default in paying the tax on admitted income. What the statute perhaps cannot take away is a ves....
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....hat 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 promptly, this situation would not have arisen. In any case, the petitioner was not aware that the Settlement Commission had not disposed of the proceedings till 1.6.2007. He therefore, could not be blamed for not fulfilling the requirement of payment of additional tax before 3....