Gujarat High Court
M. Kantilal And Exports vs Income Tax Settlement Commission on 13 March, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/SCA/20443/2017 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 20443 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 20444 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 20445 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 20446 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
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M. KANTILAL AND EXPORTS
Versus
INCOME TAX SETTLEMENT COMMISSION
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Appearance:
MR TEJ SHAH(5743) for the PETITIONER(s) No. 1
NOTICE SERVED(4) for the RESPONDENT(s) No. 2,3
UNSERVED WANT OF TIM(31) for the RESPONDENT(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Page 1 of 8
C/SCA/20443/2017 JUDGMENT
Date : 13/03/2018
COMMON ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. These petitions arise in common background and involve common issues. All the petitions are directed against a common order of the Settlement Commission dated 28.08.2017. The petitioners had filed applications for settlement for the block period way back in the year 2003. When these applications were pending before the Settlement Commission, certain amendments were made in the Income Tax Act, 1961 ('the Act' for short) in the chapter pertaining to settlement of cases by virtue of which a settlement application would abate if not disposed of within prescribed time. The petitioners approached the High Court by filing various individual petitions contending that by virtue of operation of these statutory provisions, their settlement applications are likely to abate shortly. They have not attributed to any delay in disposal of the settlement applications. The statute which brings about such harsh consequences for no fault of the petitioners is therefore not valid. These petitions along with similar petitions of other petitioners being Special Page 2 of 8 C/SCA/20443/2017 JUDGMENT Civil Application No.5208 of 2008 and connected petitions came to be disposed of by the Division Bench of this Court by an order dated 16.05.2008. The Court noted that the Supreme Court vide an order dated 31.03.2008 passed in case of Prabhu Dayal vs. Union of India, in Writ Petition (Civil) No.113 of 2008, was seized of identical situation. The Court had passed interim order on 31.03.2008 staying the provisions for abatement of proceedings for settlement of the petitioner therein. The Court noted the readiness of the petitioners to abide by the outcome of the judgment of the Supreme Court in case of Prabhu Dayal (supra). The Court therefore disposed of all the writ petitions in following terms:
"6. We, therefore, dispose of these petitions with a direction that the petitioners as well as the respondents shall abide by the outcome of Writ Petition (Civil) No.113 of 2008 and connected matters before the Hon'ble Supreme Court.
7. We further direct that till the Hon'ble Supreme Court decides the issue which is raised in the present group of petitions, the assessing authorities and the appellate authorities under the Income Tax Act, 1961 shall not take up the matters which are to be treated as pending before the Settlement Commission and disposal of these petitions Page 3 of 8 C/SCA/20443/2017 JUDGMENT on the above ground shall not come in the way of the Settlement Commission in disposing of the matters before it in accordance with law.
8. Liberty to revive the petitions in case of necessity, upon filing a note before the Registry."
2. After this order was passed by the High Court, two important developments took place. The Supreme Court disposed of the case of Prabhu Dayal (supra) by an order dated 11.03.2011 allowing the petitioner to withdraw the petition. Thus, the proceedings before the Supreme Court in case of Prabhu Dayal (supra) came to be disposed of without a decision on the controversy at hand. The second important development was that the Bombay High Court in case of Star Television News Ltd. v. Union of India and others reported in [2009] 317 ITR 66 (Bom) considered a similar challenge to the same statutory provisions providing for abatement of settlement proceedings. The Court read down the provisions and declared that it is a statutory duty of the Settlement Commission to dispose of an application which is filed before it unless due to any reasons attributable to the applicant, the Settlement Commission has been Page 4 of 8 C/SCA/20443/2017 JUDGMENT prevented from fulfilling the said duty and only in such a case the proceedings would abate on the date specified under section 245HA(1)(iv) of the Act. The Court required that the Settlement Commission should consider whether the proceedings had been delayed on account of any reasons attributable to the applicant. If the conclusion is that it was not so, the application for settlement would not abate. We may record that this judgment of the Bombay High Court in case of Star Television News Ltd. (supra) was carried by the Revenue to the Supreme Court and the Supreme Court vide its judgment in case of Union of India v. Star Television News Ltd. reported in [2015] 373 ITR 578 (SC) approved the judgment of the Bombay High Court.
3. With this background, when the proceedings were taken up by Settlement Commission for hearing, both sides made their arguments on the question of abatement. The Settlement Commission by the impugned order declared that all the proceedings had abated on the ground that the petitioners had earlier approached the High Court and agreed to abide by the judgment of the Supreme Court in case of Prabhu Page 5 of 8 C/SCA/20443/2017 JUDGMENT Dayal (supra) and no relief was granted by the Supreme Court in such case. This was the only ground on which the applications have been closed.
4. Before proceeding further, we may record that by the same impugned order, the Settlement Commission has also rejected the application for settlement of another assessee M/s. M. Kantilal & Co. who is a petitioner of Special Civil Application No.20442 of 2017. We have consciously not included this petition for common disposal under this judgment since facts in the said case are somewhat different. The Settlement Commission has rejected the case on an additional ground of nonpayment of full tax with interest over and above the question of abatement of proceedings.
5. In the present group of petitions, we are of the opinion that the Settlement Commission has committed an error in disposing of the proceedings as having abated. It is true that the petitioner had earlier approached this Court on the issue of applicability of the abatement provisions and such petition was disposed of, the petitioners to abide by the judgment Page 6 of 8 C/SCA/20443/2017 JUDGMENT of the Supreme Court in case of Prabhu Dayal (supra). However, the Supreme Court did not have occasion to decide the case of Prabhu Dayal (supra) on merits. By virtue of interim order passed by the Supreme Court in the said case or for any other reason, it appears that, by the time the Supreme Court took up the case for final hearing, the issues were no longer alive. The petitioner Prabhu Dayal therefore withdrew his case. This disposal of the proceedings before the Supreme Court without expression of the opinion on merits, cannot be allowed to extinguish the petitioner's rights and contentions. From the outset, the petitioners had taken a stand that the abatement proceedings are not valid and cannot apply so harshly as to terminate their proceedings for no fault of theirs. By the time the commission took up the applications for settlement for further hearing, the law was made sufficiently clear by virtue of declaration by Bombay High Court in case of Star Television (supra) and approval of such view of Bombay High Court by the Supreme Court. When the Settlement Commission was therefore taking up the applications for settlement for further Page 7 of 8 C/SCA/20443/2017 JUDGMENT hearing, it was obliged to apply such law. If the proceedings were delayed due to the reasons attributable to the applicants, the provision for abatement would apply but not otherwise. The Settlement Commission has not recorded any such finding. The department has not brought any facts to our notice to permit any further inquiry in this respect by the Settlement Commission. In plain terms therefore there is no material before us to hold that the application for settlement of the present petitioners were belated due to the reasons attributable to the petitioners.
6. In the result, the impugned order of the Settlement Commission is set aside. The proceedings are revived and placed back before the Settlement Commission for disposal in accordance with law.
7. All petitions disposed of accordingly.
(AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH Page 8 of 8