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(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1. This petition is filed challenging an order dated 4.10.2007  passed   by   respondent   no.1   Income   Tax   Settlement  Commission   ("the   Commission"   for   short)   by   which   the  petitioner's  application  dated 28.5.2007   for settlement  of  the petitioner's cases for the assessment years 2001­2002  to 2007­2008 came to be declared as having abated on the  ground   that   the   petitioner   failed   to   pay   the   full   tax   and  interest before the last date provided under the statute i.e.  31.7.2007.   The   petitioner   has   also   challenged   the  constitutionality   of   sections   245D(2A),   245D(2D)   and  245HA   of   the   Income   Tax   Act,   1961   ("the   Act"   for   short)  inserted by the Finance Act 2007 as ultra vires Article 14  of the Constitution.

12. There   were   significant   changes   in   these   statutory  provisions with effect from 1.6.2007. Under sub­section(1)  of section 245C, now the assessee applying  for settlement  of his case,  would  pay the additional  tax and interest  on  the   income   disclosed   in   the   application   for   settlement.  Proof  of   payment  would  be   attached   with   the   application  itself. Though certain changes have been introduced also in  sub­sections   1A   to   1D   of   section   245C   pertaining   to  computation   of   additional   tax   and   interest,   we   are   not  directly   concerned   with   such   changes.   Requirement   of  payment   of   additional   tax   with   interest   within   the  prescribed   time,   failure   of   which   would   result   into  abatement   of   the   proceedings   before   the   Settlement  Commission, was introduced by way of the newly inserted  sub­section(2A)   of   section   245D   of   the   Act   read   with  clause(ii)   of   sub­section(1)   of   section   245HA   of   the   Act.  Under sub­section(3) of section 245HA, upon abatement of  the   proceedings   before   the   Settlement   Commission   when  the   Assessing   Officer   proceeds   to   dispose   of   the   pending  HC-NIC Page 13 of 31 Created On Sat Sep 16 06:31:28 IST 2017 C/SCA/6379/2008 JUDGMENT cases, the Assessing Officer or other income­tax authority  would   be   entitled   to   use   material   and   other   information  produced   by   the   assessee   before   the   Settlement  Commission, as if such material had been produced before  the Assessing Officer or the authority as the case may be.  We may reproduce these relevant provisions : 

15. Amending   such   statutory   provisions,   now   after  1.6.2007,   the   statute   requires   an   assessee   applying   for  settlement to make payment of additional tax with interest  while making application for settlement itself. In fact, sub­ section(1) of section 245C now requires that the applicant  would   produce   the   proof   of   the   payment   along   with   the  application. For those applications which were made before  1.6.2007,   a   special   provision   was   made   under   sub­ section(2A)  of section 245D granting time upto 31.7.2007  in   cases   where   no   order   under   sub­section(1)   of   section  245D  was passed before 1.6.2007 by providing that if the  additional  tax  on  the  income  disclosed  in the  application  HC-NIC Page 17 of 31 Created On Sat Sep 16 06:31:28 IST 2017 C/SCA/6379/2008 JUDGMENT with   interest   is   paid   before   31.7.2007,   such   application  shall   be   deemed   to   have   been   allowed   to   be   proceeded  further.   Newly   inserted   section   245HA   provides   for  abatement   of   proceeding   before   the   Settlement  Commission. Under clause (ii) of sub­section (1) of section  245HA,   an   application   made   under   section   245C   which  has not been allowed to be proceeded further under sub­ section   (2A)   or   further   proceeded   with   under   sub­section  (2D) of section 245D, the proceedings before the Settlement  Commission  shall abate on the specified  date. As per the  explanation of the said sub­section, specified date in such  a case would mean 31st July, 2007. 

22. We   may   recall   sub­section(1)   of   section   245HA  provides   for   abatement   of   proceedings   before   the  Settlement  Commission  under  certain  circumstances.    As  per sub­section(2) of section 245HA, where the proceedings  HC-NIC Page 24 of 31 Created On Sat Sep 16 06:31:28 IST 2017 C/SCA/6379/2008 JUDGMENT so   abate,   the   Assessing   Officer   or   the   income­tax  authorities   before   whom   the   proceedings   at   the   time   of  making  of the application  was pending,  would  proceed  to  dispose  of  the  same  in accordance  with  the  provisions  of  the Act as if no application for settlement was made. While  doing   so,   under   sub­section(3),   such   authority   would   be  entitled   to   use   all   the   material   and   other   information  provided   by   the   assessee   before   the     Commission   or   the  results   of   the   inquiry   held   or   evidence   recorded   by   the  Commission in the course of such proceedings, as if such  material,   information,   inquiry   and   evidence   had   been  produced before the Assessing Officer or the authority. The  effect  of  sub­section(3)  of  section  245HA  is  to  enable   the  income­tax authority, be it Assessing Officer or some other  authority,  who upon abatement of settlement proceedings  would proceed to decide the pending cases in accordance  with the provisions of the Act, to utilise all the material and  other   information   produced   by   the   assessee   before   the  Commission   as   well   as   the   material   collected   through  inquiry during  the course  of such  settlement  proceedings  or evidence recorded by the Commission.   Effectively, this  would   transpose   the   material   before   the   Commission,  collected   till   the   proceedings   reached   the   stage   of  abatement before the income­tax authority, who would be  entitled to use the same.