TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 774
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....and questions of law arise in both these Writ Petitions, we shall decide the same together. 3. The petitioner in W.P.(C) 3479/2021 is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of execution of large scale EPC/Turnkey Water Management Projects all over India. On 11.10.2019, a search and seizure was conducted by the Income Tax authorities at the office of the petitioner. On 02.03.2021, the Deputy Commissioner of Income Tax, ('DCIT', for short), Central Circle-19 issued notices under Section 153-A upon the petitioner for the Assessment Year ('AY', for short) 2014-15 till 2019-20 based on the search. Thereafter, the petitioner engaged a consultant to prepare its application under Section 245 C of the Act to be filed before the ITSC for the said Assessment Years. However the petitioner then learnt that in light of the provisions of the Finance Bill, 2021, the ITSC was not accepting any application under Section 245 C of the Act. Hence, the petitioner filed the writ petition before this Court on 16.03.2021. On 17.03.2021, this Court passed an interim order directing the ITSC to accept and process the application of the petitio....
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....tutional, as they have been passed by the Parliament as a money bill even though they do not fulfil the criteria of a money bill as specified in Article 110 of the Constitution of India; dd. Issue an appropriate writ, order or direction declaring that the Petitioner is not required to file a fresh application under Section 245C and that the application filed by it on 22.03.2021 shall be considered to be a 'pending application' as defined in Section 245 (eb) of the Income Tax Act, 1961; ee. Issue an appropriate writ, order or direction declaring that in light of the press release issued by the Central Board of Direct Taxes, dated 07.09.2021, the Petitioner is not required to file a fresh application under Section 245C and that the application filed by it on 22.03.2021 shall be considered to be a 'pending application as defined in Section 245 (eb) of the Income Tax Act, 1961; ff. Issue an appropriate writ, order or direction clarifying that the Respondent No. 1 continued to exist and function till 01.04.2021, as per the provisions of the Income Tax Act, 1961, then in force, unaffected by the provisions of the Finance Act, 2021; gg. Issue an appropr....
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....corporated under the provisions of the Companies Act, 1956 and is engaged in the business of transmission and distribution of electricity in the state of Uttar Pradesh. On 11.10.2019, a search and seizure was carried out by the Income Tax authorities at the office of the petitioner. Thereafter, on 18.03.2021, the DCIT, Central Circle-19, Delhi, issued notices under Section 153 C upon the petitioner for the AYs 2014-15 till 2019-20 and under Section 143(2) for the AY 2020-21. As the petitioner learnt that the ITSC was not accepting any application, it approached this Court by way of the Writ Petition, pursuant whereto, this Court passed an interim order directing the ITSC to accept and process the application of the petitioner in accordance with the provisions of the Act as the Finance Bill, 2021 had not morphed into a statute as of that date. On 25.03.2021, this Court made the interim order absolute, during the pendency of the petition. On 30.06.2021, the petitioner received notices under Section 143(2) of the Act for AYs 2014-15 to 2019-20. 8. The prayers made in the amended petition are the following:- "a. Issue an appropriate writ, order or direction to Respondent No....
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....riate writ, order or direction declaring the proviso to Section 245B(1), the proviso to Section 245BC, the proviso to Section 245BD and Section 245C(5) of the Income Tax Act, 1961, as inserted by the Finance Act, 2021, to the extent that it applies w.e.f 01.02.2021, as unconstitutional and in violation of inter alia, Articles 14, 19 (l)(g), 20, 21 and 300A of the Constitution of India and consequently directing the Respondents to treat the application filed by the Petitioner No. 1 before Respondent No. 1 on 22.03.2021 as a 'pending application' as defined in Section 245A(eb) of the Income Tax Act, 1961; hh. In the alternate, issue an appropriate writ, order or direction reading down the proviso to Section 245B(1), the proviso to Section 245BC, the proviso to Section 245BD and Section 245C(5) of the Income Tax Act, 1961, as inserted by the Finance Act, 2021, to hold that the said provisions will be effective from 01.04.2021 and not from 01.02.2021 and consequently directing the Respondents to treat the application filed by the Petitioner No. 1 before Respondent No. 1 on 22.03.2021 as a 'pending application' as defined in Section 245A(eb) of the Income Tax Act, 1961; ....
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.....04.2021 on the ground that they are arbitrary to the extent they retrospectively abolished the ITSC w.e.f. 01.02.2021. While he conceded that there can be no filing before the ITSC after 01.04.2021, there cannot be a complete vacuum between 01.02.2021 and 01.04.2021 as the law does not contemplate the same. Therefore the question that needs to be answered by this Court is, whether the petitioners, having already made settlement applications on 22.03.2021, at which point there was no amendment of the statute, can be denied acceptance/processing of the said applications by way of a retrospective amendment. 13. He submitted that this issue is no longer res integra and has been squarely dealt with by the Bombay High Court in Sar Senapati Santaji Ghorpade Sugar Factory v. ACIT, 2024 SCC OnLine Bom 981 which was delivered in the backdrop of identical factual circumstances, i.e., on 25.07.2019, a search under Section 132 of the Act was conducted on the petitioner therein, and a notice was received under Section 153 A on 05.02.2021, which was after the Finance Bill, 2021 was introduced but before the Finance Act, 2021 came into force. The petitioner therein had filed an application bef....
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....t of the High Court of Madras in Jain Metal Rolling Mills v. Union of India (2024) 461 ITR 423, which according to Mr. Tripathi, has read down Section 245C(5). The SLP preferred by the Revenue against the judgment bearing SLP(C) No. 16226/2024 has been dismissed, leaving the question of law, if any, open. 18. He has also referred to the judgment of the High Court of Gujarat in Vetrivel Infrastructure v. DCIT, (2024) 468 ITR 665. The SLP preferred by the Revenue against the judgment bearing SLP (C) Diary No. 9862/2024 has also been dismissed leaving the question of law, if any, open. 19. A reference is also made to the judgment of the High Court of Calcutta in Pradeep Kumar Naredi v. Union of India : 2024 SCC OnLine Cal 11543, wherein, the appellant was subjected to search and seizure under Section 132 on 16.01.2020. Notices under Section 153A were issued on 02.02.2021 and the appellant therein preferred an application before the ITSC on 17.03.2021. The Court, while setting aside the impugned judgment of the Single Judge, relied upon the judgments in Sar Senapati Santaji Ghorpade Sugar Factory, Jain Metal Rolling Mills, and Vetrivel Infrastructure (supra), and directed the Int....
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....retation which would benefit the tax payers, i.e., the conjunction 'and' appearing in paragraph 4 of the order should be read as 'or' which would make it clear that the application filed on or before 30.09.2021 are to be treated as 'pending applications' and are to be decided by the Interim Board. Any other interpretation will render the order redundant and otiose. 26. His contention is that the impugned provisions and the press release dated 07.09.2021 along with the order dated 28.09.2021 seek to create an artificial distinction between assessees in respect of whom notices under Section 153A where issue prior to 01.02.2021 and such assessees to whom notices were issued after 01.02.2021. Thus to fix 01.02.2021 as the cutoff date is arbitrary and has no rational nexus to the object sought to be achieved, namely, dismantling the ITSC w.e.f. 01.04.2021. 27. He submitted that in Star Televisions News Ltd. v. Union of India: Writ Petition No. 952 of 2008, the Bombay High Court was concerned with the vires of the Finance Act, 2007 which provided that applications made before 01.06.2007 that are pending before the ITSC as on 31.03.2018 shall abate. The Court held that such a classi....
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.... of all the facts and incomes which have not been subjected to assessments and has also paid hefty amounts along with interest while filing the settlement application, various admissions made therein could now be considered by the income tax authorities separately, which would severely prejudice the petitioners, further subjecting them to severe penalties. The declaration of the application of the petitioners as non-est would have disastrous consequences for the petitioners as on one hand, the application filed before the ITSC would be dismissed in limine having been filed invalidly, and on the other hand the respondents would be free to use the information contained in the said application in the normal course of assessment to the detriment of the petitioners, as if the applications of the petitioners, though filed validly, were declared invalid or rejected in terms of Section 245D of the Act. This would result in the violation of the rule against self incrimination enshrined in Article 20 (3) of the Constitution of India. Additionally, since the petitioners have filed the applications pursuant to orders of this Court dated 17.03.2021 and 22.03.2021, such a course of action would ....
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....1, after noticing the judgment in K. S. Puttaswamy v. Union of India : (2019) 1 SCC 1, he would not press the argument. 36. Per contra, Mr. Sanjay Kumar, learned Senior Standing Counsel appearing for the respondents - the Revenue, would contest the stand of the petitioners and submit that the ITSC is a creation of a statute having been set up under Chapter XIX-A of the Act by the Taxation Laws (Amendment) Act, 1975, w.e.f. 01.04.1976. The ITSC provides for an alternative dispute resolution forum to assesses, wherever any assessment is pending, to approach it by making a full and true disclosure and settle the additional tax liabilities at the time of filing of settlement application. However, the Parliament, in its legislative wisdom, decided that the ITSC was no longer necessary, and through the Finance Act, 2021 discontinued the ITSC w.e.f. 01.02.2021 and constituted the Interim Board for settling pending applications of those persons who were eligible to make an application as on 01.02.2021. He has referred to the judgment of the Supreme Court in B.N. Bhattacharjee (supra) to contend that primary purpose of constitution of the ITSC was to ensure accelerated recovery of taxes ....
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....s laid before the Lok Sabha on 01.02.2021. 40. Mr. Kumar submitted that it is a settled position of law that legislation can be held invalid on the ground of discrimination only when equals are treated unequally or unequals are treated as equals. If there is equality and uniformity within each group, the law cannot be discriminatory. In the present case, the petitioners have failed to prove as to how the Finance Act, 2021 fails to provide for equality and uniformity within each group and hence the same cannot be held to be discriminatory. 41. He has referred to the judgment of the Supreme Court in Union of India and Ors. v. VKC Footsteps India Pvt. Ltd. (2022) 2 SCC 603¸ where the Court, while dealing with the vires of a provision of refund under the CGST Act, 2017, relied on the reasoning given in Union of India and Ors. v. Nitdip Textile Processors Pvt. Ltd. and Ors. [2011] 15 taxmann.com 59 (SC) to observe as under: "76.... Parliament is entitled to make policy choices and adopt appropriate classifications, given the latitude which our constitutional jurisprudence allows it in matters involving tax legislation and to provide for exemptions, concessions and b....
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....be passed in the Lok Sabha with respect to "the imposition, abolition, remission, alteration or regulation of any tax". The functioning of the ITSC would qualify as an 'imposition', 'remission', 'alteration' or 'regulation' of a tax. The provisions for ITSC provide for regulation of income tax in a certain manner and hence any amendment thereto can be validly brought in by way of a Money Bill in view of the mandate of Article 110 of the Constitution of India. 46. He has sought dismissal of the petitions. ANALYSIS 47. Having heard the learned counsel for the parties, the common issue arising for consideration in these petitions is whether the petitioners are entitled to the relief as sought in the petitions for consideration of their settlement applications under Section 245-C of the Act. 48. There is no dispute that in both the cases, searches were conducted in the year 2019. The notice under Section 153-A of the Act in W.P.(C.) 3479/2021 and the notices under Sections 153-C and 143(2) of the Act in W.P.(C.) 3710/2021 were issued on 02.03.2021 and 18.03.2021 respectively. 49. The issue revolves around the amendments introduced by the Union Government to the Act, more....
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....021. The right to file application before the Income-tax Settlement Commission is very much existent and has been exercised till March 31, 2021. The retrospective legislation by way of legal fiction attempts to make it as if it is unavailable. .... Therefore, when we consider the instant case, the purpose of the retrospective legislation is to make the ITSC inoperative right from the date of the introduction of the Bill and to send all the pending applications to the Interim Board. Therefore, fixing the last date for filing the applications alone travels beyond the purpose and results in more retrospectivity than which is needed and thus, runs counter to the other parts of the Act. As a matter of fact, as per the principle of lex prospicit non respicit (law looks forward not back) it can be seen that the purport of the legislation is only to do away with the policy of resolution through ITSC. As a matter of fact, the Central Government has to make a Scheme for the purposes of Settlement in respect of pending applications by the Interim Board as per Section 245D(11) and such scheme had to be placed before the Parliament. Thus, neither there is any intent nor it is ....
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....such vested right cannot be taken away by the legislature unless the same is done expressly or by necessary implication. It has not been so done by the amendments introduced by the Finance Act, 2021. The Hon'ble Apex Court in Shah Sadiq & Sons (Supra) was concerned with the issue of allowability of carry forward and set off speculation loss. As per the Income Tax Act, 1922, set off of the loss was allowed indefinitely. In the Income Tax Act, 1961, however, a time limit had been prescribed for such set off of carry forward loss. The Hon'ble Apex Court held that assessee had a vested right in the year of loss to carry it forward and set it off against subsequent business profit and such vested right has not been taken away in the subsequent amendment, either by express words or by necessary implication. The Hon'ble Apex Court, accordingly, held that assessee would be entitled to set off of the earlier speculation loss against the profits even after the 1961 Act. In our view, Shah Sadiq & Sons (Supra) supports the view that a right which had accrued to approach the Settlement Commission till the notification of the Finance Act, 2021 on 1st April 2021 stood vested in the eligible asses....
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....ulars under Section 119 of the Act and such circulars would be binding on Income Tax Authorities. A circular, however, cannot impose on a taxpayer a burden higher than what the Act itself, on a true interpretation, envisages. Therefore, the Board had power to extend the time limit for making an application to 30th September 2021. However, to the extent it lays down an additional condition, i.e., assessee should be eligible to file an application for settlement on 31st January 2021 in paragraphs 2 and 4(i) of the impugned notification, in our view, is beyond the scope of the power of CBDT as per Section 119 of the Act. There is no provision in the Act providing a cut off date with respect to an assessee being eligible to make an application under Section 245C of the Act. Hence, such a condition in the impugned notification is clearly invalid and bad in law. The date on which an assessee becomes eligible to make an application and the date on which the assessee makes an application are two different things and the Act only provides a cut off date for the latter and not the former. Section 245C of the Act as amended by the Finance Act, 2021, provides that an applicat....
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....es a notice after inordinate delay from the search, respondent No. 1 should not be entitled to claim that petitioner has lost its right to approach the Settlement Commission on account of such delayed action of respondent No. 1 itself. Hence, even otherwise, on the facts of the present case, respondent No. 1 should be estopped from contesting/ contending that petitioner is not eligible for approaching the interim board for having its application settled by the appropriate authority." (emphasis supplied) 53. It may be stated here that the Supreme Court has dismissed the challenge made to both the above judgments of the High Court of Madras and the High Court of Bombay. 54. The High Court of Gujarat while dealing with the same issue, has in Vetrivel Infrastructure (supra) held as under: "23.It is pertinent to note that when the Finance Bill came into force and became the law with effect from April 1, 2021, the provisions of section 245C(5) of the Act, which provides that no application shall be made under this section on or after February 1, 2021 cannot obliviate, the applications already filed by the petitioners as on the date of filing of the application for....
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....(supra) has in paragraphs 8 to 15 held as under:- "8. On a consideration of the rival submissions, we find that the grievance of the assessees was essentially on account of the amendments that were brought about to the I.T. Act through the Finance Act, 2021. Prior to that, the major amendments effected to the provisions of Chapter XIX-A, that governed the eligibility of an assessee to approach the Settlement Commission for a settlement of their cases, and the procedure to be followed for the same, were in 2010, 2014 and 2015 through the respective Finance Acts of those years. Thereafter, the substantive provisions governing eligibility of an assessee to approach the Settlement Commission remained unchanged for over five years when the Finance Act, 2021 was enacted, that provided for the abolition of the Settlement Commission itself, and the settlement of pending cases by an Interim Board for Settlement that was constituted solely for that purpose. 9. On a reading of the statutory provisions as they stood during the relevant time, it is unambiguously clear that in terms of Section 245C, an assessee could, at any stage of a case relating to him, approach the Settlem....
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....ereunder. The Interim Board for Settlement was constituted solely to 'tie up any loose ends' by completing the exercise of settlement in cases that were pending as on the date of abolition of the Settlement Commission. 11. For the sake of completion, it needs to be noticed that there was litigation that ensued at the instance of assessees, who found that their vested right to opt for settlement under the I.T. Act had been taken away with effect from a date that was anterior to the date of coming into force of the Finance Act, 2021 viz. 01.04.2021. The said issue was resolved through the judgment of the Madras High Court in Jain Metal Rolling Mills (supra) that held that those amendments to the I.T. Act could take effect only from 01.04.2021, and hence the assessees could file applications for settlement upto 31.03.2021. The above declaration of law has since attained finality through the dismissal of further proceedings carried by the Revenue before the Supreme Court. 12. While so, through an order passed under Section 119(2)(b) of the I.T. Act, the CBDT clarified that applications for settlement could be filed upto 30.09.2021. However, the said relaxation....
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....he Hon'ble Apex Court in UCO Bank (supra) to mean that the Board is entitled to tone down the rigours of law by issuing circulars under Section 119 of the Act and such circulars would be binding on Income Tax Authorities. A circular, however, cannot impose on a taxpayer a burden higher than what the Act itself, on a true interpretation, envisages. Therefore, the Board had power to extend the time limit for making an application to 30th September 2021. However, to the extent it lays down an additional condition, i.e., assessee should be eligible to file an application for settlement on 31st January 2021 in paragraphs 2 and 4(i) of the impugned notification, in our view, is beyond the scope of the power of CBDT as per Section 119 of the Act. There is no provision in the Act providing a cut off date with respect to an assessee being eligible to make an application under Section 245C of the Act. Hence, such a condition in the impugned notification is clearly invalid and bad in law. The date on which an assessee becomes eligible to make an application and the date on which the assessee makes an application are two different things and the Act only provides a cut of....
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.... b. The ITSC being a creature of statute, and in view of Section 245C, the assessees had a vested right to have their applications decided. c. Such rights of the assessees cannot be said to have been taken away, in absence of any express words or necessary implication in the Finance Act, 2021 to that effect. d. The order dated 28.09.2021 limiting the extension of time for filing the application to only those assessees who were eligible to file applications as on 31.01.2021 is bad in law. e. Even the settlement applications of the assessees filed between 01.02.2021 and 31.03.2021 are held to be validly filed and need to be decided. 60. In the matters at hand, the cases of the assessees commenced with the issuance of notice under Sections 153A, 153C and 143(2) in the month of March, 2021, and the settlement applications were made on 22.03.2021, pursuant to the orders passed by this Court. As such the applications were validly filed before the ITSC which legally and factually existed, i.e., much before the Finance Act, 2021 was promulgated on 01.04.2021. It cannot be disputed that at the time of filing of the applications, they had a pending case agai....
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.... being a creation of statute, and also in view of Section 245C of the Act, the petitioners had a vested right to have their applications filed and considered. Mr. Sanjay Kumar would oppose this by stating that in view of the reading of Section 245D of the Act, the petitioners have no vested right to approach ITSC, and even if it is assumed for the sake of argument that they have some vested rights, they can be taken away by the legislature if it deems fit to do so. 63. Suffice it to state, the ITSC (or the Interim Board) being a creation of a statute, the assessees do have a statutory right to approach the same, seeking concession. As held by the High Court of Bombay in Sar Senapati Santaji Ghorpade Sugar Factory (supra), though the orders of the ITSC may have the trappings of a concession, the same is exercised by the State through a statutory scheme. Whether or not the concession is granted, the assessees are, in fact, vested with a right to apply for the same to the ITSC. 64. It is settled law that the right of the Parliament to make a retrospective amendment cannot be disputed. However, if any vested right is to be taken away by the legislature, it should be done by expre....