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TaxTMI 
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2023 (11) TMI 1111
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.... Assisted by Mr. R. Sivaraman & M/s.Vandana Vyas (in W.P.No.13445 of 2023) For the Petitioner(s) : Mr. R. Sivaraman, Assisted by M/s.Vandana Vyas (for rest of the W.P's) For the Respondent (in all cases) : Mr. A.R.L. Sundaresan, Additional Solicitor General of India. Assisted by Mr. Rajesh Vivekanathan, Deputy Solicitor General of India. (for R1), Mr. A.P. Srinivas, Senior Standing Counsel. and Mr. ANR. Jayaprathap, Junior Standing Counsel. (for R2 & R4) COMMON ORDER MR. JUSTICE. D.BHARATHA CHAKRAVARTHY All these writ petitions are connected to each other and are filed with two sets of prayers. The petitioners pray for a writ of declaration, declaring the amendment to the Income Tax Act, 1961 in Section 245-A by inserting Sub-Clause (da), (ea) and (eb), 245B, 245BC,245BD, proviso to 245C, 245D, 245DD, 245F, 245G, 245H and insertion of new Section 245AA and 245M by way of Sections 54 to 65, Finance Act, 2021 with retrospective effect from 01.02.2021 as arbitrary, illegal and void and infringing the fundamental rights conferred under Article 14,19(i)(g), 20, 20 (2) and 21 of the Constitution of India, 1950, thus unenforceable and unconstitutional. 2. The petitio....
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....ees, on account of the sudden and retrospective amendment, in exercise of its powers under Section 119(2) of the Act, a press release was issued on 07.09.2021 and thereafter an Order in the nature of a Trade Circular was issued on 28.09.2021 extending the time limit for filing applications before the Interim Board upto 30.09.2021. However, paragraph (4) of the said Order reads thus:- "4. The above relaxation is available to the applications filed:- (i) by the assessees who were eligible to file application for settlement on 31.01.2021 for the assessment years for which the application is sought to be filed (relevant assessment years); and (ii) where the relevant assessment proceedings of the assessee are pending as on the date of filing of the application for settlement. " 7. As a matter of fact, immediately after the introduction of the Bill before the Parliament, fresh applications were not accepted before the ITSC as such, several petitioners had approached the Courts of law and upon directions of Court their applications were received and are pending. After the extension of time upto 30.09.2021, in some cases, the applications were rejected on the ....
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.... date was made conditional upon their right being crystallised as on 31.01.2023 as the intention was only to extend the last date not the operation of the provisions of ITSC beyond the date of its abolition. 10. We have heard the Learned Counsel Appearing on behalf of the Petitioners. Mr. J.D.Mistry, the Learned Senior Counsel led the arguments on behalf of the petitioners in detail, while the other Learned Counsel adopted and supplemented to his submissions. Mr. A.R.L. Sundaresan, the Learned Additional Solicitor General of India, argued on behalf of the respondents. 11. Mr.J.D. Mistry, the Learned Senior Counsel after taking us through the specific facts in respect of W.P. No.13554 of 2021, would submit that it can be seen that in all these matters searches were conducted and documents were called for well before 31.01.2021. For the reasons best known to them, the authorities issued the notice of re-opening only after 31.01.2021 and thus, the very right of approaching the ITSC now in the scheme of things stood dependent on the vagaries of action being taken by the authorities as per their convenience. In any event, the impugned enactment came to be notified only on 01.04.20....
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....ote of caution that the binding nature of the circular issued by the central board of revenue must be confined to tax laws and that also for the purpose of giving administrative relief to the taxpayer and not for the purpose of imposing a burden on him. ... ." 16. The Judgment of the Supreme Court of India in, Reliance Jute Industries Ltd -Vs- Commissioner of Income Tax [1979 2 TAXMAN 417 SC], was relied upon, referring to paragraph 6 to contend that it is a cardinal principle of the tax law that the law to be applied is that which is in force for the assessment year unless otherwise provided expressly or by necessary implication. The assessees had a vested right to approach ITSC as per the law in force for the assessment year. 17. He would further rely upon the Judgment of the Supreme Court of India in, Uco Bank -Vs-Commissioner of Income Tax [1999 104 TAXMAN 547 SC], of which the relevant portion of the paragraph 18 is extracted hereunder for ready reference :- "18. .... The relevant circular of CBDT cannot be ignored. The question is not whether a circular can override or detract from the provisions of the act; the question is whether this circular seeks to mitiga....
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....0. The Learned Senior Counsel further relied upon the Judgment of the Supreme Court of India in, Punjab State Cooperative Agriculture Development Bank Limited -Vs- The Registrar of Cooperative Society and others (Civil Appeal Nos. 297-298 of 2022, dated 11.01.2022), and the relevant paragraph 47 reads as under :- "47. The exposition of legal principles culled out is that an amendment having retrospective operation, which has the effect of taking away the benefit already available to the employee under the existing rule, indeed divest the employee from his vested or accrued rights and that being so, it would be held to be violative of the rights guaranteed under Article 14 and 16 of the Constitution" 21. The Judgment in, Union of India & Others -Vs- Tushar Ranjan Mohanty and others [1994 5 SCC 2020], is pressed into service for the proposition that when the petitioners' applications were taken on file pursuant to orders of Courts of law, then the retrospective legislation which makes the relief obtained nugatory would be illegal. The relevant passage in paragraph 14 is as follows :- "14. The legislatures and the competent authority under Article 309 of the Const....
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....such, the classification is capricious, whimsical and thus violative of Article 14 of the Constitution of India. Relevant portion of paragraph 42 of D.S. Nakara, is extracted hereunder :- "42. If it appears to be undisputable, as it does to us that the pensioners for the purpose of pension benefits form a class, would its upward revision permit a homogeneous class to be divided by arbitrarily, fixing an eligibility criteria unrelated to purpose of revision, and would such classification be founded on some rational principle? The classification has to be based, as is well settled, on some rational principle, and the rational principle must have nexus to the objects sought to be achieved. ..." 25. On behalf of the petitioners, the decision of the Learned Single Judge of the Calcutta High Court in W.P.A.No.3048 of 2022, along with the Order of stay granted by the Division Bench in M.A.T.No.375 of 2022 are also produced. 26. On the basis of all the above, the learned Senior Counsel would submit that the grievance of the petitioners will stand addressed even by reading down of circular. In the event of the circular being found to be in order, the petitioners press for the....
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....a State Legislature is not declared bad " "17. This Court has repeatedly stated that legislative enactment can be struck down by Court only on two grounds, namely (i), that the appropriate Legislature does not have competency to make the law and(ii), that it does not take away or abridge any of the fundamental rights enumerated in Part - III of the Constitution or any other constitutional provisions.." "32. While dealing with constitutional validity of a taxation law enacted by Parliament or State Legislature, the court must have regard to the following principles: (i), there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature. (ii), no enactment can be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found. (iii), the court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence(iv), hardshi....
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....way the same. Reference was made to the Judgment in, Commercial Tax Officer -Vs- Viswanathan Junjunwala and others [1996 5 SCC 626], whereby the amendment by which the suo moto power of the Assessing Authority was taken away was held to be valid. Further reliance was made to R.C. Tobacco Pvt. Ltd. -Vs- Union of India [2005 7 SCC 725], to contend that not only there is power to amend, repeal or supersede, such powers can be exercised retrospectively also. The exercise cannot be unreasonable because the restrospectivity was only 2 months and no unforeseen financial burden arises on account of such amendment. Paragraphs 20, 21, 22, 28 and 29 were referred to. The necessary passages are extracted below:- "20. The competence of parliament and the State legislatures to repeal, amend or supersede an exemption notification is unquestionable. The power to do so retrospectively cannot be and is also not doubted. ...... 21. A law cannot be held to be unreasonable, merely because it operates retrospectively. ...... ...The unreasonability must lie in some other additional factors. The retrospective operation of a statute would have to be found to be unduly oppressive ....
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....erused the material records of the cases. The following three questions arise for consideration in the present cases :- (i) Whether or not paragraph No.4(i) of the Circular, dated 28.09.2021 is bad in law inasmuch as it imposes a condition of eligibility to file application for settlement as on 31.01.2021 ? (ii) Whether or not the Finance Act, 2021 is unconstitutional inasmuch as it has given retrospective application with effect from 01.02.2021? (iii) To what reliefs, the petitioners are entitled ? Question No.i : 35. The impugned circular is issued in the exercise of power under Section 119(2) of the Act. The offending clause 4(i) is extracted supra in paragraph No.6 above. On a consideration of the decisions relied on by both sides and submissions made, to answer the question in the present context of the case, it is clear that a circular issued by the respondents under Section 119 of the Act: (i) would be binding on the departmental authorities; (ii) It is issued to ensure uniform and proper administration and the application of the Income Tax Act; (iii) It cannot add any new condition or anything contrary to the statute; (iv) But, in order to m....
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....inoperative with effect from 01.02.2021, it cannot be said that clause 4(i) of the circular runs counter or imposes an additional condition to the statute. Accordingly, Question No.i is answered. Question No.ii : 37. The basic ground of attack on the constitutionality of the impugned enactment is that it is retrospective in nature and that it takes away the vested rights of the petitioners. The further submission is that the vested rights are taken away by fixing an artificial cut-off date. In this regard, the contention on behalf of the State is that the settlement itself is concession and therefore, the writ petitioners cannot claim any vested right. We are unable to countenance the said argument on behalf of the State. It may be true that the orders passed by ITSC containing terms of settlement has the trappings of concession and benevolence showered by the State to a particular assessee. But, such benevolence, concession etc., are exercised by the State through a statutory regime. Under the statute, the assessees are entitled to approach the appropriate authority seeking such concession/benevolence. Therefore, the question with which we are concerned is the 'right to appr....
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....ications. It can be seen that in respect of the case of the petitioners whose matters had arisen before the notification of the Act on 01.04.2021, but, after the cut-off date of 01.02.2021, were also very much eligible to approach the ITSC. The decisions relied upon by both sides in respect of retrospective legislation referred to supra, unequivocally hold that if the retrospective legislation takes away a vested right, it must do so by providing expressly or by necessary intendment. We step back and read the Amending Act namely, the Finance Act, 2021 carefully. While the ITSC is made inoperative with effect from 01.02.2021 and an Interim Board is set up, provisions are made to transfer pending applications, absolutely, the Amending Act or the entire Chapter XIX-A as it stands after the amendment, does not expressly deal with or provide anything by necessary intendment regarding those applications which are made or the eligible cases in the interregnum. This being so, the ratio of the Judgment of the Hon'ble Supreme Court of India, in Commissioner of Income Tax -Vs- Shah Sadiq & Sons (cited supra) would apply in all force that a right which had accrued to approach the ITSC till....
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....tion is to be resorted to." This passage was quoted with approval by the House of Lords in Hill v. East & West India Dock Co.[(1884) 9 AC 448, 456 : 51 LT 163 : 32 WR 925 (HL)] This principle of statutory interpretation has been accepted by this Court. In Bengal Immunity Co. Ltd. v. State of Bihar[AIR 1955 SC 661 : (1955) 2 SCR 603, 646 : 1955 SCJ 672] it was held that "a legal fiction is to be limited to the purpose for which it was created and should not be extended beyond that legitimate field". This was reiterated in CIT v. Amarchand N. Shroff [AIR 1963 SC 1448 : 1963 Supp (1) SCR 699, 709 : (1963) 1 SCJ 411], Maharani Mandalsa Devi v. M. Ramnarain (P) Ltd. [AIR 1965 SC 1718 : (1965) 3 SCR 421, 424 : (1965) 2 SCJ 853] and CIT v. Vadilal Lallubhai [(1973) 3 SCC 17, 22 : 1973 SCC (Tax) 1, 6 : AIR 1973 SC 1016 : (1973) 1 SCR 1058, 1064]. Assuming, therefore, that an application for variation of the conditions of a permit referred to in subsection (8) of Section 57 is to be deemed by a fiction of law to be an application for the grant of a new permit, the question to which we must address ourselves is for what purpose is such an application for variation deemed to....