Calcutta High Court
Ram Gopal Bajoria vs Income Tax Settlement Commissi0Oner ... on 28 February, 2014
Author: Harish Tandon
Bench: Harish Tandon
ORDER SHEET
W. P. No. 355 of 2013
IN THE HIGH COURT AT CALCUTTA
Constitutional Writ Jurisdiction
ORIGINAL SIDE
RAM GOPAL BAJORIA
Versus
INCOME TAX SETTLEMENT COMMISSI0ONER (IT & WP) & ORS.
BEFORE:
The Hon'ble JUSTICE HARISH TANDON
Date : 28th February, 2014.
Appearance :
Mr. J. P. Khaitan, Sr. Adv.
Mr. A. Sen, Adv.
Mr. D. Dey, Adv.
Mr. P. Ghosh, Adv.
... for the petitioner
Md. Nizamuddin, Adv.
... for the respondents
The Court : A piquant situation has arisen in the present case because of the language employed under section 245(H)(A)(1)(iv) of the Income Tax Act. According to the department, since a cut off date is provided therein in the event that the settlement commission could not dispose of the proceeding, for the proceeding to abate the petitioner who was bona fide proceeding before the said settlement commission have been put to the risk of being punished and or proceeded with under the other panel provisions of the Income-Tax Act. At the 2 time of moving the writ petition the petitioner categorically said that the settlement commission have delivered the order openly which was seriously disputed by Md. Nizamuddin the learned advocate representing the department. To eradicate such disputes this Court directed the record pertaining to the settlement commission proceeding was directed to be brought before this Court. The record would reveal that the hearing was concluded by the settlement commission and a draft copy or the order or judgment was also prepared. Though, there is some confusion as according to the petitioner there was no descent amongst the members of the settlement commission but it appears that one of the members has not agreed to the draft order or judgement. It is further apparent from the record that initially the members were not in descent but subsequently one of the members did not agree to the draft order or judgement. Admittedly, the draft judgement was not sent to the third member, at least it does not appear from the record of the settlement commission proceeding.
Mr. Khaitan, learned senior advocate for the petitioner vehemently submits that his client all along co-operated with the members of the settlement commission so that the proceeding may be disposed of within the cut off period which would further appear from the recording made in the proceedings before the settlement commission. He further, submits that if no lapses or laches can be attributed on the part of his client the cut off date as enshrined under section 245HA(1)(iv) of the said act cannot act as a deterrent to have the order passed by the settlement commission. By saying that the cut off date provided under said section is unreasonable and arbitrary.
3Mr. Khaitan placed reliance upon the judgement of the Bomay High Court in the case of Star Television News Ltd. Vs. Union of India and Ors. reported in (2009) 317 ITR 66 (Bom). Mr. Khaitan further submits that the ratio of judgement rendered in the case of State Television News Ltd. (supra) was accepted in applied in the case of Md. Sanaul Haque vs. Union of India reported in (2012) 250 C.T.R. 218 and in cast of Jai Guru Jewelers vs. Union of India in (2013) 38 taxmann.com 393 (Allahabad). Mr. Khaitan audaciously submits that the act of the Code shall not prejudice any one and placed reliance upon a judgement of this Court in the case of Commissioner Income-Tax vs. Ballabh Prasad Agarwalla reported in (1998) 233 I.T.R. page 354. According to him the judgement of this Court took note of a judgement rendered by the Apex Court in the case of Priyanka Overseas Pvt. Ltd. Vs. Union of India reported in 1991 (51) E.L.T. 185 (S.C.) wherein it is held that the department cannot take advantage of its own wrongful and illegal act. On the similar point he further placed reliance upon a judgement of the Supreme Court in the case of Kuil Fireworks Industries vs. Collector of Central Excise reported in 1997 (95) E.L.T. 3 (S.C.). Lastly, he submits that the authorities have misinterpreted the provisions contained under section 245HA(1)(iv) of the said Act and have recorded the abatement of the proceedings without satisfying itself as to whether the assessee was at fault and have adopted the dilatory tactics to avoid the disposal of the said settlement commission proceedings within the cut off date as already by Bombay High Court in case of Star Television News Ltd. (supra). 4
Md. Nizamuddin learned advocate for the department relied upon the language used in the section 245HA(1)(iv) of the said Act to contend that if the statute provides for a cut off date within which the proceeding is to be completed and, therefore, the authorities have rightly proceeded to record that the proceeding have been adopted as it could not be disposed of within the cut off date. Md. Nizamuddin further submits that the aforesaid provisions where introduction subsequently by amending the act and if the legislature intended to incorporate the cut off date. Any other interpretation which would nullify and or frustrate the legislative intend for which it is incorporated should be avoided. Lastly, Md. Nizamuddin submits that the record would reveal that one of the members did not agree to a draft order and, therefore, there was no consensus arrived amongst the members of the settlement commission which would lead to further inference the proceedings was not disposed of on or before the said cut off date and, therefore, has abated.
Having considered the respective submissions made at the bar as indicated in first paragraph of this judgement that section 245HA(1)(iv) of the said Act which provides a cut off date within which the settlement commission proceeding is required to be disposed of can act as a debtor to the relief claim by the petitioner who voluntarily disclosed all the facts with a bona fide intention to have the matters settled under the aforesaid provisions should be subjected to the rigorous panel provisions if the settlement commission proceeding is not disposed of within the cut off date.
5
Before proceeding to till that issue it would be appropriate to take note of the changes made by amending the provisions from time to time the legislative changes and the object behind it can be decipher from the judgement of the Bombay High Court in the case of Star Television News Ltd. (supra) chapter 19A was introduced by a decision Laws (Amendment Act 1975) w.e.f. first April 1976. Initially under section 245C of the said Act which bestowed the power on the assessee to make an application before the settlement commission by making of full and final disclosure of his income which was not disclosed or concealed before the assessing officer whereas section 245D was introduced the procedure to be followed by the commissioner on the receipt of the application. Subsection 4A of section 245D as it stood prior to the further amendment requires every application shall be allowed to be proceeded with and the settlement commission shall pass an order within four years from the end of the financial year in which such application was allowed to be proceeded. Several changes were introduced by the Finance Act 2007 by providing the time limits for completion of the proceedings section 245D 4A of the said Act contemplates two different situations, firstly, an application made under subsection 2A or subsection 2D to be disposed of on or before 31st day of March 2008 and secondly an application made on or after 1st June of 2007 to be disposed of 12 months from the date of the end of the month. Further, amendment was brought by the Finance Act 2010 by introduction of a third eventuality that is in respect of an application made after 1st Day of June 2010 the same is required to be 6 dismissed on 18 months from the end of month in which the application was made.
Therefore, in all the cases the outer limit within which the proceeding is to be completed is provided under the aforesaid section. The most striking features of the aforesaid provision is that in the event the application is rejected by a settlement commission or is not disposed of within the cut off date the proceeding would be deemed to have abated on the said specified date and the assessing officer or any other Income-Tax authority before whom the proceeding at the time of making an application was pending shall be entitled to use all the materials and other in pleading produced by the assessee before the settlement commission and shall thereafter proceed for the adjudication which may attract the panel proceedings as well. The identical and similar point was agitated before the Bombay High Court in the case of Star Television News Ltd. (supra) where a full and true disclosure was made by the assessee before the settlement commission but the proceeding could not be disposed of before the cut off date and the department treating the said proceeding to have abated proceeded against the petitioner. As argument was advanced that if the assessee was not in default so far as the carriage of the proceeding is concerned it cannot be used adversely to his interest because the settlement commission could not be disposed of the proceeding on or before the cut off date as enshrined under section 245HA of the said Act.
The Bombay High Court held in paragraphs 50,54,55 & 59 are as follows;-
7
"50. It is further submitted that the following settled principles of statutory interpretation, this hon'ble court would read the provisions of section 245HA(1)(iv) in the manner suggested by the petitioners, viz., it is only applications where applicants have, by some wilful act or omission prevented the Settlement Commission from fulfilling its statutory mandatory duty under section 245D(4A) would stand the application abate.
Ordinarily, the court assumes that the entire legislative process is influenced by considerations of justice and reason, and avoids a construction which is inequitable or onerous or operates harshly, ridiculously or in any other manner contrary to prevailing conceptions of justice and reason. Where the plain literal interpretation of a statutory provision produces a discriminatory or incongruous or manifestly absurd or unjust result which could never have been intended by the Legislature, the court may modify the language used by the Legislature or even "do some violence" to it, so as to achieve the obvious intention of the Legislature and produce a rational construction.
54. The principles set out above in the abovementioned decisions quarely apply in the present case where the purported objective of the amendments introduced in Chapter XIX-A by the 2007 Act is to streamline the proceedings before the Settlement Commission and to ensure expeditious disposal of pending cases. The said amendments cannot be construed as punishing an applicant for the inability or failure of the Settlement Commission to dispose of its application within the period specified in section 245D(4A) where such delay in disposal is not attributable to the applicant. The time limit for disposal of an application under 8 section 245D(4A)(i) will have to be read as "may" to the extent that it is not on account of the fault of the applicant. It does not do some violence to the language, but at the same time the constitutionality of the provision can be upheld. To do otherwise would be to punish an applicant for the inability of the Settlement Commission to fulfil its statutory obligation, for matters completely beyond the applicant's control. As set out above, the court will presume that the Legislature enacts laws which are honest, fair and equitable and that the legislative process is influenced by considerations of justice and reason. Accordingly, an interpretation leading to such an unjust, inequitable, harsh and absurd result must be rejected. Consequently, section 245HA (1)(iv) must be read in the manner set out above only to applications where the applicants have, by some wilful act or omission, prevented the Settlement Commission from fulfilling its statutory mandatory duty under section 245D(4A) only such applications will abate. To do so will also avoid the inequitable and unjust result whereby an applicant, who has been induced to pay the tax on the income disclosed and interest thereon by reason of a statutory assurance that its application will be settled by the Settlement Commission on or before March 31, 2008, is penalised for no fault of its own by the abatement of its application and the attendant consequences, including disclosure of the confidential information and material to the income-tax authorities for use in proceedings before them as also possible proceedings for penalty and prosecution. It is for the Settlement Commissioner to decide the aspect of the matter.
55. By reading the words "any other application made under section 245C" in section 245HA(1)(iv) as "any other application made under section 245C, where 9 due to reasons attributable to the assessee" this court would avoid rendering any part of either section 245D(4A)(i) or section 245HA(1)(iv) otiose, meaningless or redundant. The two provisions, read in such a harmonious manner, would mean that the Settlement commission must fulfil its mandatory statutory duty in disposing of such applications as are referred to in section 245D(4A)(i) by the date specified therein except where prevented from doing so due to any reason attributable on the part of the applicant, and that an application in respect of which the Settlement Commission has been prevented from fulfilling the aforesaid manadatory statutory duty due to any reasons attributable on the part of the applicant shall abate on the specified date under section 245HA(1)(iv). In this manner both section 245D(4A)(i) and section 245HA(1)(iv) will have applicability, meaning and effect. We may also clarify that the expression "reasons attributable"
should be reasonably construed. While so dealing the settlement Commission shall also to consider whether in the petition before this court the petitioner had averred that the proceedings were delayed not on account of any reason attributable to him, and whether the State had denied the same. If there be no denial then to consider that circumstances in favour of the petitioner.
59. From the above discussion having arrived at a conclusion that fixing the cut off date as March 31, 2008, was arbitrary the provisions of section 245HA(1)(iv) to that extent will be also arbitrary. We have also held that it is possible to read down the provisions of section 245HA(1)(iv) in the manner set out earlier. This recourse has been taken in order to avoid holding the provisions as unconstitutional. Having so read, we would have to read section 245HA(1)(iv) to mean that in the even the 10 application could not be disposed of for any reasons attributable on the part of the applicant who has made an application under section 245C. Consequently, only such proceedings would abate under section 245HA(1)(iv). Considering the above, the Settlement Commission to consider whether the proceedings had been delayed on account of any reasons attributable on the part of the applicant. If it comes to the conclusion that is was not so, then to proceed with the application as if not abated. Respondent no. 1 if desirous of early disposal of the pending applications, to consider the appointment of more Benches of the Settlement Commission, more so at the Benches where ther is heavy pendency like Delhi and Mumbail."
The Allahabad High Court in the case of Joy Guru Jewelers (supra) took note of the judgement rendered by the Bombay high Court and held that though the proceedings contained under section 245D 4A and section 245HA does not offends the constitution but the legislature never intended that the abatement is an inhabitable conclusion but it should be taken recourse of in the prospective of any legislative or delay on the part of the assessee.
The Jharkhand High Court in the case of Md. Sanaul Haque (supra) also held that if the assess cannot be blamed for delay in disposal of the settlement commission proceeding the application shall not be deemed to have abated in the following words ;-
"7. The issue of validity of section 245HA read with section 245HA(3) of the Income Tax Act 1961 as inserted by Finance Act, 2007 was uder challenge before the Division Bench of the Bombay High Court as its Constitutional validity 11 was challenged wherein the Bombay High Court held that section 245HA(3) has the effect of severely prejudicing the interests of applicants who in good faith made available the confidential information based on bona fide belief and a legitimate expectation that settlement orders would be passed and confidential information disclosed by such applicants would not be available to the Income-Tax Authorities for use by them against such applicants. The Division Bench of the Bombay High Court further held that consequences of upholding Section 245HA(3) of the Income Tax Act, 1961 would be to cause prejudice to the interest of the applicant. Then, it has been held that provisions of Section 245HA(1)(iv) read with section 245HA(3) of the Act so read have to be held arbitrary, unreasonable and violative of Article 14 of the Constitution of India. The Bombay High Court also considered the various other provisions of the said enactment and so far as issue involved before us is concerned, for that it will be worthwile to mention here that the Bombay High Court held that in a case there was no fault of the applicant and he himself is not responsible for delay in getting decision on the Settlement Application, in that situation, the application shall not abate."
The matter can be viewed from another angle Section 245(H)(A)(I)(IV) of the Income Tax Act, 1961 requires the statutory authority to complete the proceedings within the period indicated therein. One of the cardinal principles of interpretation of statute is that where a statute requires the time at or within which an act is to be done by the public officer or body, it is ordinarily construed to be directory as to the time but it is not so in case of a private individual. The reason behind it that the interest of the individual should not suffer by the laches 12 of any public officer. In this regard the reference the can be aptly made to a judgement of the Supreme Court rendered in the case of Dattatrays v. State of Bombay [AIR 1952 SC 181] it was held as under :-
"Generally speaking the provisions of a statute creating public duties are directory and those conferring private rights are imperative. When the provisions of statute relate to the performance of a public duty and the case is such that to hold null and void acts done in neglect of this duty would work serious general inconvenience or injustice to persons who have no control over those entrusted.
With the duty and at the same time would not promote the main object of the Legislature, it has been the practice of the courts to hold such provisions to be directory only, the neglect of them not affecting the validity of the acts done."
The inevitable conclusion which could be arrived from the ratio of the aforesaid reports that if the application filed by the assessee before the Settlement Commission does not automatically abate if disposal could not be made within the cut off date unless the delay in disposing of the said application has been occasioned because of the conduct of the assessee. The view also appears to be reasonable and rational from another angle. The cut off date is provided with the clear intent to have the proceeding to be disposed of expeditiously and not to be prolonged at the instance of the assessee. It is the settlement commission who have to deal the situation and activate themselves to dispose of the application taken out before them within the outer limit as prescribed under the statute and for their own wrong and fault the assessee who all along co-operated and associated in disposal of the said application cannot be put to an adverse situation which he never conceal of at the time of making an application. The aforesaid proposition can be fortified from a judgement rendered 13 by the Supreme Court in paragraph 36 of the case of Priyanka Overseas Pvt. Ltd. vs. Union of India reported in 1991 (51) ELT 185 (SC) is as follows ;-
"36. The question is whether the appellant is liable to pay duty on the balance quantity of 6746.468 MT of Palm Kernel and if so, what should be the rate of duty. In determining this question it must be borne in mind the statutory principle that it a party discharges its liability by complying with the requirement of law, and presents papers for clearance of goods, it is obligatory on the Revenue authorities to pass the order immediately thereon. If the Revenue authorities either refuse to pass the order on some erroneous or imaginary grounds or on account of any misconception of law, the department cannot take advantage of its own wrong in demanding higher rate of duty from the importer. Under Secs. 68 and 71 of the act, goods placed in a warehouse can be taken out only after clearance for home consumption. Admittedly, the appellant had done its part of legal duty by presenting bills of entry and complying with Sec. 68(a) of the Act on 28-1-1988. But the Customs Officer refused to release the goods on an erroneous assumption that the appellant was liable to pay redemption fine and since it had not paid the said amount, the goods were not liable to be released. The High Court held that the imposition of redemption fine was non est and the petitioner was within its right to claim release of goods without paying any redemption fine, on the day it complied with the formalities under Sec. 68 of the Act. Sec. 68 (c) of the Act prescribes an official function which was not performed by the Customs authorities due to entertainment of a wrong and illegal notion regarding the payment of redemption fine which resulted into a wrong order by the department. In the circumstances the 14 department cannot be allowed to take advantage of its own wrongful and illegal act. In mounding relief, this Court has always applied principles of equity in order to do complete justice between the parties."
The aforesaid principle is reiterated by the Apex Court in the case of Kuil Fireworks Industries (supra) where it is held that person could not be made to suffer on account of a wrongful and illegal act of the statutory authorities. The reliance can further be placed on a judgement of this Court in case of Commissioner of Income Tax vs. Ballabh Prasad Agarwalla the division bench held that an act of the Court shall not cause injury to any one in these words ;-
"The Allahabad High Court in the case of Laxmi Electronics Corporation Ltd. v. CIT [1991] 188 ITR 398, 401, held that the Tribunal has no power to review. Its only power is one of rectification conferred by section 254(2). It is a well-settled proposition that an act of court (which, in the context, means and includes a Tribunal of the nature of the Income-tax Appellate Tribunal), should not prejudice a party. In such a case, it would not be just to drive the party to a reference under section 256. It must be left to the Tribunal to reopen the appeal if it finds that it has omitted to deal with an important ground urged by the party. It is not correct to say that the expression "record" in the phrase "mistake apparent from the record" in section 254(2) means only the judgement. The record means the record before the Tribunal. Failure to deal with a preliminary objection amounts to a mistake apparent from the record.15
It is not a case where the Tribunal has reviewed or intended to review the earlier order. It is not a case where there is any scope for change of the opinion or view already taken. It was a case where the Tribunal found that the Tribunal had not considered the effect of rule 6DD (j) of the Income-tax Rules, which is a statutory rule and the circular of the Department in the matter of application of the provisions of section 40A(3) of the Act."
In the instant case there is not recording relating to the conduct of the petitioner before the Settlement Commission relating to the non-disposal of the proceedings on or before the cut off date. The record has been taken to the provisions of section 245HA(1)(iv) of the said act by the department to treat the said proceeding to have abated having not disposed of within the cut off date. One important aspect which this Court feels to record is that the draft order was prepared by one of the members and was sent to the other members for his concurrence. If the said member did not agree to the draft order it is a duty cast upon the authority to send the said draft judgement to a third member for his opinion and /or views. There is no embargo under the act to pass an order on majority after recording the descending minority view. Such course is not adopted in the instant case the record reveals that the matter was put on static the moment descent is noted or recorded by one of the member. Applying ratio as decided in the case of Star Television News Ltd (supra) this Court have no hesitation to hold that the stand of the department proceeding has abated is not correct. The Settlement Commission is directed to proceed with the matter treating the said application to have not abated and shall see the said proceeding 16 should be completed in all respect within four weeks from the date of communication.
Let the record pertaining to the settlement case which was brought before this Court be sent down immediately to the department concerned by Special Messenger at the costs of the petitioner. Such costs shall be put in by Tuesday (04.03.2014).
The office is directed to take immediate steps for sending down the record immediately.
(HARISH TANDON, J.) SBI