These two writ petitions has been filed by the petitioners with identical prayer that order dated 19.12.2016 passed by the Income Tax Settlement Commission, Additional Bench-II, New Delhi(for short ‘the Settlement Commission’) may be quashed and set aside and the Settlement Commission may be directed to complete the proceedings expeditiously.
Facts of the case are that the petitioners earlier filed D.B. Civil Writ Petition No. 6089/2008 and 6090/2008 before Division Bench of this Court challenging constitutional validity of provisions of Section 245D(4A) and 245HA of the Income Tax Act, 1961(for short ‘the Act’) as substituted/inserted by the Finance Act, 2007 insofar as providing for the automatic abatement of settlement application, if no final order is passed by the Settlement Commission before 31.03.2008. Said writ petitions were disposed off by Division Bench of this Court vide order dated 25.04.2016 directing the Settlement Commission to complete the settlement proceedings within a period of six months from the date of receipt of copy of that order. The petitioners claim to have served copy of aforesaid order before the Settlement Commission with letter dated 27.06.2016. The petitioners then made a request vide letter dated 29.06.2016 to the Principal Bench of the Settlement Commission to take up the matters urgently in view of the time limit fixed by Division Bench of this Court. However, since the jurisdiction of the case was transferred to the Additional Bench of the Settlement Commission, matters could not be immediately taken up. Pursuant to letter written by the Secretary, Additional Bench(II) New Delhi to the Secretary, Principal Bench, New Delhi seeking transfer of the record from the Principal Bench to Additional Bench, it transpired that the records of the cases of the petitioners were not traceable. The Chairman of the Settlement Commission approved for reconstruction of the files and in that process, considerable time was consumed and the files could be reconstructed towards the end of September, 2016. In the meantime, reports under Rule 9 of the Rules could be called from the Income Tax Department vide letter dated 02.09.2016.
Mr. Sanjay Jhanwar, learned counsel for the petitioners argued that proceedings were resumed by the Settlement Commission at a time when less than four months time was left to complete the time limit fixed by this Court. All earnest efforts were made by the petitioners to get the dispute settled with the Income Tax Department within the remaining time period. However, the Settlement Commission vide order dated 19.12.2016 declined to complete the proceedings and allowed it to be abated by observing that the request of Pr. CIT to grant period of one and half month is justified and therefore, the final order cannot be passed within the stipulated period of six months. Learned counsel submitted that the Settlement Commission was unjustified in making the observation that adjournments were sought by the petitioners. It is contended that only two short adjournments were sought by the petitioners, out of which first was on account of compelling circumstances and the voluminous work involved and second adjournment was sought due to death of the father of Shri Neeraj Jain, who was handling the matters on behalf of the petitioner, as counsel. The Settlement Commission has overlooked the fact that as long as 2 months and 5 days time was wasted on account of the fact that original records of the cases were not traceable and the files had to be reconstructed under the order of the Chairman of the Settlement Commission. Therefore, abatement proceedings in these cases were not justified. The petitioner alternatively filed application in the aforesaid writ petitions seeking extension of time limit prescribed by the Court for adjudication of Settlement Application. It is submitted that on account of abatement of the proceedings by the Settlement Commission, Income Tax Department authorities are not proceedings with the regular assessment and served notice on the petitioners on 04.01.2017. Left with no option, the petitioner had to file these writ petitions. It is, therefore, prayed that impugned order passed by the Settlement Commission may be set aside and reasonable time may be granted/extended to the Settlement Commission to concluding the settlement proceedings. Learned counsel for the petitioners, in support of his arguments relied upon the judgment of the Bombay High Court in Star Television News Limited Vs. Union of India, (2009) 225 CRT (Bom) 140 wherein it was held that fixing the cutoff date as 31.03.2008 was arbitrary and the provisions of Section 245HA(1)(iv) to that extent will be also arbitrary. Instead of striking down the said provision, Bombay High Court has read down the same by observing that the proceedings could be taken to be abated in the event the application could not be disposed off for any reasons attributable on the part of the applicant, who has made an application under Section 245C. Reliance is also placed upon the judgment of the Supreme Court in Union of India Vs. Star Television News Limited, (2015) 12 SCC 665 wherein the Supreme Court declined to interfere with the aforesaid judgment of Bombay High Court, but issued certain directions.
Mr. Anil Mehta, learned counsel for the respondents opposed the writ petitions and argued that applications of the petitioners have rightly been held to have abated because the Settlement Commission was not able to decide the applications within six months as directed by Division Bench of this Court. It is argued that as per Section 245HA(2) of the Act, where a proceeding before the Settlement Commission abates, the Assessing Officer or as the casemay be, any other income tax authority before whom the proceeding at the time of making the application was pending, shall dispose off the case in accordance with the provisions of the Act as if no application under Section 245C has been made. In the present writ petitions, the petitioners have not challenged the provisions of Section 245HA(iv) of the Act, therefore, writ petitions are not maintainable. The petitioners could have filed applications for review or recalling of order dated 19.12.2016 before the Settlement Commission itself.
Learned counsel relied upon the judgment of Madhya Pradesh High Court at Gwalior Bench in Preeti Goyal Vs. Union of India & Others(Writ Petition No. 5529/2010 decided on 25.09.2014) and argued that in that case, Madhya Pradesh High Court relied on the judgment of the Supreme Court in Hope Textiles Limited Vs. Union of India, (1995) Suppl. 3 SCC 199 and held that a direction cannot be issued by the Court to a statutory authority to act contrary to statutory provision and the assessing officer is bound to complete the assessment or reassessment within the prescribed statutory limit. In that case, the application for settlement under Section 245C was filed on 28.05.2007 and according to sub section 4A of Section 245D of the Act, the specified date would be 31.03.2008 and if the period from 28.05.2007 to 31.03.2008 be excluded, which comes to 10 months and 3 days, then the assessment has to be completed up to 31.10.2009. It was held that the revenue had no power and authority to continue the assessment proceeding beyond the statutory period of limitation.
It is argued that this issue was also dealt with by the Gujarat High Court in Acron Pharmaceuticals Vs. Union of India(Special Civil Application No. 2694/2012 decided on 29.08.2013). In that case, the Gujarat High Court also considered the judgment of the Bombay High Court in Star Television News Limited(supra) and held that it is required to be noted that as per the settled proposition of law, the provision of law is required to be read down either to uphold its constitutionality and so as to achieve the object and purpose and/or when there is some ambiguity in the provision. In the facts of that case it was further observed by the Gujarat High Court that Section 32F(6) of the Act to the extent it provides abatement of the proceedings in case the Settlement Commission does not pass final order within the time prescribed in the said provision is a complete code with all necessary safeguards and to achieve the object and purpose of speedy disposal of cases and speedy recovery of duties, which is held to be neither unreasonable nor arbitrary and/or violative of Article 14 of the Constitution of India. There is no need to further read down the said provision.
Learned counsel also relied upon the judgment of Karnataka High Court in RNS Infrastructure Limited Vs. Income Tax Settlement Commissioner & Others(Writ Petition No. 46275-46289 of 2016 decided on 07.12.2016) wherein the Settlement Commission had passed order on 27.05.2016. It was contended that the High Court had granted interim stay order in the writ petition filed by the Revenue vide order dated 29.04.2015 which remained in operation till 03.12.2015. Writ petition was dismissed vide order dated 18.01.2016. The petitioner therein sought exclusion of the period of stay in writ petition before the Settlement Commission while computing the limitation provided under Section 245D(4A)(iii) of the Act and contended that time limit gets extended by 31.12.2016. However, the Settlement Commission arrived at the conclusion that time limit would be up to June, 2016 and passed final order on 27.05.2016 quantifying the tax liability of the petitioner therein taking into consideration the seized material, statements recorded during the course of search and also by examination of various physical evidences from hard discs and other material. The Karnataka High Court distinguished the judgment of Bombay High Court in Star Television Limited(supra) holding that the same is not applicable to the facts of that case.
I have given my anxious consideration to rival submissions and perused the material on record.
In the present cases, writ petitions have been led before Single Bench because the validity of provisions of Sections 245D(4A) and 245HA of the Act have not been challenged and writ petitions have been filed seeking extension of time fixed by Division Bench of this Court while relying upon the judgment of the Supreme Court in Union of India Vs. Star Television News Limited(supra) wherein judgment of the Bombay High Court in Star Television News Limited(supra) was upheld.
Despite citing of judgments of High Courts of Karnataka, Madhya Pradesh and Gujarat by learned counsel for the respondents, the core issue which remains to be decided in the present writ petitions is not that whether the time limit for deciding settlement application can be extended or not. That issue stands decided when matters were earlier laid before the Division Bench of this Court because at that time the petitioners also challenged the constitutional validity of provisions of Sections 245D(4A) and 245HA of the Act. The Division Bench of this Court, without going into the constitutional validity of the aforesaid provisions, but relying upon the judgment of the Supreme Court in Union of India Vs. Star Television News Limited(supra) remitted the matters back to the Settlement Commission to consider the issue of delay and if it found that delay was not attributable to the applicant, to complete the proceedings within six months. Out of that period of six months, period of two months and five days was lost because the original records of these matters could not be traced and eventually it had to be reconstructed under the order of the Chairman of the Settlement Commission. Even for the remainder period of four months, case of the petitioners is that they are not to be blamed completely. Division Bench of this Court rendered the judgment on 25.04.2016 in the presence of learned counsel for the assessee as well as revenue. Settlement Commission has noted that the petitioners claimed to have deposited copy of the aforesaid judgment of Division Bench of this Court with the Principal Seat of the Settlement Commission at New Delhi with letter dated 27.06.2016 and thereafter, the petitioners vide another letter dated 29.06.2016 made request to fix the cases urgently in view of the time fixed by this Court. Subsequently, the petitioners claim to have personally handed over copies of the letter to the Secretary, Additional Bench II, New Delhi. Accordingly, a letter dated 05.07.2016 was written to the Secretary, Principal Bench, New Delhi to transfer these two cases to that Bench. The Additional Bench-II received the matters with the letter of the Principal Bench dated 19.08.2016.
It is, thereafter, that attempts were made to reconstruct the records in these cases with the help of the petitioners and the concerned Pr. CIT at Jaipur. Reports required under Rule 9 were called vide letter dated 02.09.2016 latest by 15.09.2016 from Pr. CIT(Central) Jaipur. The reports were received vide letter dated 14.09.2016, which were duly forwarded to the petitioners vide letter dated 15.09.2016 with request to submit comments on the report by 07.10.2016. Notice of hearing dated 16.09.2016 was sent to the petitioners by fixing 02.11.2016 as the date for hearing. Letter dated 07.10.2016 was received from the petitioners requesting for extension of ten days time to furnish comments on Rule 9 report. Letter dated 07.10.2016 was addressed to the petitioners extending time up to 17.10.2016 for submission of comments on Rule 9 report, which was received from the petitioner vide letter dated 12.10.2016. These comments were forwarded to Pr. CIT(C), Jaipur vide letter dated 17.10.2016 for submitting counter comments by 28.10.2016, which were forwarded to the petitioners vide letter dated 28.10.2016. The petitioners were asked to offer further comments if they wished to do so and to appear for a hearing on 02.11.2016. When the hearing took place on 02.11.2016, it transpired that some more documents were required to be furnished in both the cases on the basis of which verifications were to be carried by the AO to arrive at final conclusion on the issues. The matters were adjourned to 28.11.2016 with direction to the petitioners to furnish the required documents to the Department before that date so that Pr. CIT could be ready with counter comments. The petitioners then vide letter dated 25.11.2016 sought extension of time on the ground that there was bereavement in the family of the briefing counsel at Kota and he was in a state of mourning. Final opportunity was given to the petitioners to submit comments and appear for hearing on 09.12.2016 vide letter dated 25.11.2016. Pr. CIT also gave its comments vide letter dated 25.11.2016 which were received by the Settlement Commission on 28.11.2016 and they were forwarded to the petitioners on 29.11.2016 for counter comments before the date of hearing, i.e. 09.12.2016. It is in the context of above factual matrix that the Settlement Commission in its order dated 19.12.2016 noted that since copy of order passed by Division Bench of this Court was served at Principal Bench at New Delhi on 27.06.2016, limitation for passing the order under Section 245D(4) of the Act would expire on 27.12.2016. After getting the Principal Bench’s advice on 19.08.2016, earnest attempts were made to reconstruct the files as the matters were very old and records were not readily available with the Principal Bench and thereafter to get comments of both the petitioners and the department. However, the petitioners have delayed sending their comments/counter comments repeatedly. Extension of time for appearance during hearing was also sought, knowing well that the time limit, fixed by Division Bench of this Court was approaching near. Final comments were ultimately furnished by the petitioners on 09.12.2016, just before the limitation date. The department has legitimately sought time to examine the petitioners’ comments and contentions, which cannot be granted in view of the limitation that is expiring on 27.12.2016. The Settlement Commission therefore, squarely blamed the petitioners for the delayed responses and repeated requests for adjournments, which impeded the process of finalization of the matters. However, the Settlement Commission also noted that Pr. CIT has also sought a period of one and a half months to carry out the required verification and observed that this request of the department could not be brushed aside because in view of the principles of natural justice, due opportunity needs to be given to both the parties. Therefore, the Settlement Commission held that even though period of six months fixed by this Court was expiring on 27.12.2016, it was not possible for it to conclude the proceedings by that date and therefore, proceedings in the cases should be taken to have abated.
If 27.12.2016, as per computation made by the Settlement Commission, was the date up to which proceedings were to be concluded, there was no occasion for the Settlement Commission to declare the proceedings to have abated one week before that date, i.e. on 19.12.2016, the date on which impugned order was passed. Besides, the facts as noted hereinabove would show that though the petitioners to some extent were also responsible for the delay caused in completion of the proceedings, but it cannot be said that the petitioners alone were guilty of causing such delay because the department was also contributory in prolonging the proceedings for one reason or the other, particularly when it demanded a period of one and a half months, whereas already a week’s time was left before period of six months fixed by Division Bench of this Court would have expired.
Therefore, this Court is of the opinion that ends of justice would be met, if the time to conclude the aforesaid proceedings is extended by further three months from today with direction to the parties to produce copy of this order before the Settlement Commission within a period of one week with clear stipulation that the Settlement Commission shall take up the proceedings, if not possible on day to day basis and if not, then on weekly basis and shall not grant undue adjournment to either of the parties and if adjournment is granted then it should be for a maximum period of seven days at one go and the Settlement Commission shall conclude its proceedings within a period of two months and utilize remaining period of three weeks to finalise and frame its final order.
In the result, the writ petitions are allowed. The impugned order dated 19.12.2016 is set aside. The matter is remitted back to the Settlement Commission for deciding it afresh in accordance with the aforementioned directions.
Stay applications stand disposed off.
Office is directed to place a copy of this order on record of connected writ petition.