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IN THE HIGH COURT OF KERALA AT ERNAKULAM
GOPINATH P., J.
M/s.New Hope Foundation - Appellant
Versus
Union Of India – Respondent
WP(C) Nos. 44252, 44205, 44213, 44237, 44243, 44251, 44253, 44257, 44267, 44271, 44285 of 2023, and 2017 & 2496 of 2024
Decided on : 22-08-2024
Eligibility - Income Tax Settlement - Income Tax Act, 1961 - Sections 245A, 245C, 153A, 132 - The court interpreted the amendments to Chapter XIX-A of the Income Tax Act, 1961, particularly regarding the eligibility of applications for settlement post-abolition of the Settlement Commission, affirming that rights accrued prior to the amendments remain enforceable.
Fact of the Case:
The petitioners sought to file applications for settlement under the Income Tax Act after the abolition of the Settlement Commission, arguing that their cases were eligible due to searches conducted before the amendment date.
Finding of the Court:
The court found that the petitioners were entitled to maintain applications for settlement as their cases were initiated before the relevant amendments took effect, thus preserving their rights.
Issues: Whether petitioners could file applications for settlement under the Income Tax Act after the abolition of the Settlement Commission, given the timing of the search and notice issuance.
Ratio Decidendi: The court held that the definition of 'case' under Section 245A(b) allows for applications to be maintained if the search occurred before the amendment, regardless of when the notice was issued.
Result: The writ petitions are allowed, restoring the applications for settlement to the Interim Board for adjudication.
JUDGMENT :
A short, but interesting question arises for consideration in these 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 01-02-2021. The question arising for consideration of this Court is whether, in the light of the amendments to the provisions of Chapter XIX-A of the 1961 Act, persons like the petitioners in whose cases a search under Section 132 of the 1961 Act was prior to 01-02-2021, but notices under Section 153A had been issued only after 01-02-2021, could maintain an application for settlement before the Settlement Commission/Interim Settlement Board.
3. Sri. Balbir Singh, the learned Senior Counsel appearing for the petitioners, on the instructions of Sri. R. Sivaraman, would refer to the provisions of Section 132, Section 153A and the relevant provisions of Chapter XIX-A of the 1961 Act, to contend that, since the time limit for filing an application before the Interim Settlement Board stood extended to 30-09-2021 by virtue of a notification issued by the Central Board of Direct Taxes (hereinafter referred to as the ‘Central Board’), exercising powers under Section 119(2)(b) of the 1961 Act, notwithstanding the fact that a notice under Section 153A of the 1961 Act had been issued only after 01-02-2021, the petitioners were entitled to maintain applications for settlement in terms of the provisions contained in Chapter XIX-A of the 1961 Act. The learned Senior Counsel placed considerable reliance on the judgment of the Division Bench of the Bombay High Court in Senapati Santaji Ghorpade Sugar Factory Ltd. v. Assistant Commissioner of Income Tax, Central Circle 1(1) and Ors.; MANU/MH/2202/2024; the judgment of the Division Bench of the Gujarat High Court in Vetrivel Infrastructure v. Deputy Commissioner of Income-tax; (2024) 164 taxmann.com 123 (Gujarat); as also to the judgment of another Division Bench of the Bombay High Court in Vishwakarma Developers v. Central Board of Direct Taxes and Ors; 2024 SCC OnLine Bom 2507 in support of his contentions. It is pointed out that the definition of ‘case’in Section 245A(b) r/w the provisions of Section 245C of the 1961 Act, clearly indicate that the trigger for filing an application before the Settlement Commission/Interim Settlement Board would be that a ‘case’as defined in Section 245A(b) must be pending on the date of the application. It is pointed out that the Bombay High Court in Senapati Santaji Ghorpade Sugar Factory Ltd. (supra), the Madras High Court in Jain Metal Rolling Mills v.Union of India and Ors.; MANU/TN/6417/2023, 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
AI
The court established that rights to file settlement applications under the Income Tax Act remain valid if the search occurred before the abolition of the Settlement Commission.
Eligibility for settlement applications under the Income Tax Act must align with statutory definitions, invalidating any additional conditions imposed by the CBDT.
Retrospective amendments cannot affect vested rights, and valid applications filed before such amendments remain enforceable.
The court established that amendments to the Income Tax Act cannot retroactively invalidate applications filed before the effective date of the amendments, preserving the rights of assessees.
: Assessment – In an application under S.245C of Act, for settlement of applicant's income-tax case, there should be disclosure of income not earlier disclosed before the Assessing Officer
The court established that the CBDT cannot impose additional eligibility conditions for settlement applications beyond what is prescribed in the Income Tax Act.
The Settlement Commission cannot waive or reduce mandatory interest obligations under the Income Tax Act, with interest on undisclosed income calculated from the due tax payment date until the Commis....
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