TaxTMI 
TaxTMI 
2024 (11) TMI 172
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....hese writ petitions. The question relates to the eligibility of the petitioners in these cases to file applications for settlement in terms of the provisions contained in Section 245C of the Income Tax Act, 1961 (hereinafter referred to as the '1961 Act') following the amendments to the provisions contained in Chapter XIX-A of the 1961 Act by the Finance Act, 2021. 2. The following facts are not in dispute. By virtue of the provisions contained in the Finance Act, 2021, which came into force with effect from 01-04-2021, amendments were made to the provisions of Chapter XIX-A of the 1961 Act, providing inter alia for the abolition of the Income-tax Settlement Commission (hereinafter referred to as 'the Settlement Commission') and providing that no application shall be made for settlement before the Settlement Commission on or after 01.02.2021. The amendments were to take effect from 01-02-2021. A search under the provisions of Section 132 of the 1961 Act had taken place in respect of the petitioners in all these cases prior to 01-02-2021. However, the notices following the search were issued to the petitioners under the provisions of Section 153A of the 1961 Act only after 01-02-20....
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....3, and another Division Bench of the Bombay High Court in Vishwakarma Developers (supra) had taken the view that since the Finance Act, 2021, came into force only with effect from 01-04-2021, the vested right of filing an application for settlement in respect of notices issued prior to 31-03-2021 could not be taken away. He submits that the Gujarat High Court had, even in respect of cases where notices had been issued after 31-03-2021, taken the view that the applications before the Interim Settlement Board could be maintainable, provided they were filed on or before 30-09-2021. The learned Senior Counsel also submitted that, if the right to file an application for settlement had to be determined with reference to the date of issuance of the notice, the same would result in a very anomalous situation, where, some assessees whose premises were the subject matter of search under Section 132 of the 1961 Act (on the same day) would have the right to approach the Settlement Commission if the notice under Section 153A was issued to them before 01-02-2021 (31-3-2021 by virtue of the law laid down in Senapati Santaji Ghorpade Sugar Factory Ltd. (supra)) while other assessees would have no ....
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....ication for settlement were both beyond 31-03-2021 in the facts of these cases. It is submitted that the judgment of the Bombay High Court in Senapati Santaji Ghorpade Sugar Factory Ltd. (supra), that of the Madras High Court in Jain Metal Rolling Mills (supra), and that of another Division Bench of the Bombay High Court in Vishwakarma Developers (supra) also do not come to the aid of the petitioners that those were all cases where the notices under Section 153A of the 1961 Act had been issued prior to 31-03-2021. It is also submitted that the extension of time to file an application by the Central Board in the exercise of jurisdiction vested under Section 119(2)(b) of the 1961 Act does not mean that the operation of statutory provisions abolishing the Settlement Commission with effect from 01-02-2021 stood adjourned till 30-09-2021. In other words, it is the submission that the Central Board cannot be deemed to have any authority to extend or give life to the Settlement Commission when the Parliament had categorically abolished the Settlement Commission with effect from 01-02-2021. It is submitted that these writ petitions deserve to be dismissed. 6. Having considered the submiss....
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.... for fresh assessment. 9. Section 245A(b) of the 1961 Act defines 'case' for the purposes of Section 245C of the 1961 Act. The definition of 'case' in Section 245A(b) reads thus: "245A. Definitions In this Chapter unless the context otherwise requires,- (a) xxxx xxxx xxxx (b) "case" means any proceeding for assessment under this Act, of any person in respect of any assessment year or assessment years which may be pending before an Assessing Officer on the date on which an application under sub-section (1) of section 245C is made." There is an Explanation Clause to Section 245A(b) which starts with the words "For the purposes of this clause". Explanation (ii) of Section 245A(b) of the 1961 Act (which was deleted w.e.f 1.6.2010) provided as under:- "(ii) a proceeding for assessment or reassessment referred to in clause (ii) or clause (iii) of the proviso shall be deemed to have commenced on the date of initiation of the search under section 132 or requisition under section 132A" Explanation (iiia) (which was inserted w.e.f 1.6.2010) of Section 245A(b) of the 1961 Act reads thus:- "(iiia) a proceeding for assessment or reassessment for any of the assessm....
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....manner as may be prescribed, 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 Commission to have the case settled and any such application shall be disposed of in the manner provided thereafter. A reading of the provisions of Section 153A of the 1961 Act indicates beyond doubt that in the case of a person, who is the subject matter of a search under Section 132, a 'case' as defined in Section 245A(b) can be said to be pending for the purposes of Section 245A(b) on the date of the search or immediately thereafter or from the date of the requisition, as every proceeding taken on the basis of the search or requisition is intrinsically connected to the date of the search or requisition. To a pointed question from the Court, the learned Senior Standing Counsel conceded that even concluded assessments for any of the years mentioned in Section 153A would stand re-opened if a search is conducted under Section 132. 10. There is yet another aspect of the m....
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....10022; A case is a proceeding for assessment pending before an assessing authority on the date the application is filed for settlement; ✦ Proceedings for assessment/re-assessment under Sections 147, 153A(b), 153B(1)(b) and proceedings for fresh assessment pursuant to orders under Sections 254 or 263 or 264 'shall not be a proceeding for assessment for the purposes of this clause'. In other words, proceedings under the aforesaid Sections would not amount to a 'case' for the purposes of Section 245A(b); and ✦ The Explanations indicated when the proceedings under the excluded provisions would 'COMMENCE'. In other words, no application for settlement could not be made at any time after the commencement date in respect of proceedings under the excluded provisions. The inescapable conclusion is that each explanation relates specifically to the four provisos referred to above. This can be easily demonstrated by putting each of the provisos against each of the related explanations in tabular form:- The provisos The Explanations (i) a proceeding for assessment or reassessment or recomputation under section 147 Note: This proviso was deleted w.e.f 1.10.2014 by the Fina....
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....) existed solely to clarify and elaborate on the provisos and have no independent existence or meaning. As already noticed, through the Finance Act, of 2010, proviso (ii) was deleted and explanation (iiia) was inserted into clause (b) of Section 245A of the 1961 Act. However, the addition of explanation (iiia) after the deletion of the Second Proviso was totally unnecessary. Search cases which were completely excluded from the scope of an application for settlement could now be subject matter of settlement by virtue of the deletion of the second proviso. Useful reference may be made in this regard to a Circular issued by the Government of India in the Ministry of Finance, Department of Revenue (Central Board of Direct Taxes) dated, the 6th April, 2011 (CIRCULAR NO.01/2011.F.No.142/1/2011-SO (TPL)), which to the extent relevant reads thus:- "22.1 Under the existing provisions of section 245A (b), the term "case", in relation to which an application can be made is defined as any proceeding for assessment of any person in respect of any assessment year or assessment years which may be pending before an Assessing Officer on the date on which an application is made to the Settlement C....
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....in pursuance of an order under section 254 or section 263 or section 264 of the Income-tax Act, setting aside or cancelling an assessment also be eligible for settlement before the Settlement Commission. Similar amendment has also been made in section 22A of the Wealth -tax Act." 11. That the amendments made in the year 2010 and in the year 2014 were intended to expand the scope of cases that could go to the settlement commission is evident from the relevant portions of the Budget speech for those years. In the Budget Speech of the then Union Finance Minister on 26/02/2010 for the Financial year 2010-2011 it was stated:- "123. To expeditiously resolve disputes with taxpayers I propose to expand the scope of cases which may be admitted by the Settlement Commission to include proceedings related to search and seizure cases pending for assessment. I also propose to expand the scope of Settlement Commission in respect of Central Excise and Customs so that certain categories of cases that hitherto fell outside its jurisdiction may be admitted." In the Budget Speech of the then Union Finance Minister on 10/07/2014 for the Financial year 2014-2015 it was stated:- "Advance Ruling and....
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....e on which the assessment is made; or on the expiry of the time specified for making assessment under sub-section (1) of section 153, in case where no assessment is made; In my view, since the provisos to Section 245A(b) were deleted with the intention of enlarging the scope of the term 'case''; the explanations being inextricably tied to the proviso, should also have been deleted to reflect the true intention of the Parliament. This interpretation appears to be the only palusible one considering the fact the Explanation Clauses still use the words 'commenced' and/or 'commenced' and 'concluded', even in the absence of the provisos. In other words, even though the time-frames mentioned in the Explanation Clause only identified the period of exclusion with reference to each of the proceedings taken out of the definition of 'case' by operation of the provisos which were deleted (as already noticed, two provisos deleted in 2010 and the rest were deleted in 2014) the Explanation Clauses that were ancillary to the provisos, continued to remain in the statute book. With the deletion of the provisos, the Explanation Clauses cannot by themselves control or restrict the definition of 'case'....
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....her Division Bench of the Bombay High Court in Vishwakarma Developers (supra) essentially take the same view. I am in respectful agreement with the views expressed in those cases. The order issued by the Central Board under section 119(2) of the 1961 Act permitted the actual filing of applications by assessees who are entitled to make such applications by 30.9.2021. Thus upon the interpretation that has been placed on the amended provisions of Chapter XIX-A of the 1961 Act and taking into consideration of the order issued under section 119(2) of the 1961 Act (Order bearing F.No. 299/22/2021 -Dir(Inv.III)/174 dated 28-09-2021) the position that emerges is this:- (i) If in the case of the petitioners herein, the search under Section 132 of the 1961 Act, was prior to or on 31-03-2021 they would be entitled to maintain an application for settlement under Section 245C of the 1961 Act; (ii) Such applications could have been filed till 30-9-2021 in view of the Order bearing F.No. 299/22/2021 - Dir(Inv.III)/174 dated 28-09.2021 under Section 119(2)(b) of the 1961 Act and such applications will be disposed of in accordance with the law by the Interim Board for Settlement constituted und....