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2016 (10) TMI 778 - GUJARAT HIGH COURT

2016 (10) TMI 778 - GUJARAT HIGH COURT - TMI - Rejection of application for settlement of the case by the Settlement Commission - as per the revenue, AO passed the assessment orders for five assessment years in question. - Orders were passed as on 15.3.2016 - Refusal of hand delivery through inspector - On 16.3.2016, the assessee filed application for settlement before the Settlement Commission. - Held that:- No sooner an application for settlement is filed under subsection( 1) of section 24 .....

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since such order was not dispatched or served, would lead to a conflicting situation. - For the purpose of application under section 245C(1) of the Act, a case would be pending only as long as the order of assessment is not passed. Once the assessment is made by the Assessing Officer by passing the order of assessment, the case can no longer be stated to be pending. Application for settlement would be maintainable only if filed before the said date. Date of dispatch of service of the order o .....

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KURESHI) 1. Rule. Learned counsel Mrs. Mauna Bhatt waived service of rule on behalf of the respondents. 2. These petitions arise in the common background. We may record facts from Special Civil Application No.7256/2016. This petition is filed by one M/s. Shalibhadra Developers who is a partnership firm and is engaged in the business of development and construction of residential complexes. On 7.1.2014, the petitioner was subjected to search operations. Notice under section 153A of the Income Tax .....

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efore the Settlement Commission for settling all tax disputes. Such application would be filed within a short time. Substantial amount of tax is already paid by the petitioner. The partnership is facing financial crisis. Efforts are made to pay the balance amount which would be done shortly. Assessing Officer should therefore, keep the assessment proceedings in abeyance. 4. On 10.3.2016, the petitioner wrote yet another letter to the Assessing Officer and requested him to permit a correction in .....

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petitioner through hand delivery on 15.3.2016. The partners of the petitioner firm however, refused to accept such orders, upon which, the Inspector who had visited the office of the petitioner personally, placed before the Deputy Commissioner i.e. the Assessing Officer his report on 16.3.2016. 6. On 16.3.2016, the assessee filed application for settlement before the Settlement Commission at Mumbai. In terms of Rule 44C(3) of the Income Tax Rules, 1962, ( the Rules for short), the same would ha .....

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sed that the petitioner has filed application for settlement before the Settlement Commission. 7. When the Settlement Commission took up the question of maintainability of the application of the petitioner, the Department was not party to such consideration. Before the settlement bare facts were that the order of assessment dated 15.3.2016 was served on the petitioner on 21.3.2016. With these facts, the question of maintainability of the application for settlement was discussed before the Commis .....

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versions. According to the petitioner, the application for settlement having already been filed on 16.3.2016 before even the orders of assessment were passed, such application before the Settlement Commission was maintainable. Even if such orders were passed on 15.3.2016, as contended by the department, since the same were not served on the petitioner, the assessment proceedings would be deemed to be pending and, therefore, application for settlement would be maintainable. On the other hand, ac .....

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of assessment would not be maintainable. 9. Shri S.N. Soparkar learned counsel for the assessee raised the following contentions : 1) The documents and materials on record would establish that the assessment orders were never passed on 15.3.2016 contrary to what is contended by the department. He took us painstakingly through the documents and registers on record to contend that it was highly improbable that the assessment orders which run into great length, could have been approved by the appro .....

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the file by the Assessing Officer would not terminate the assessment proceedings and in terms of section 245C(1) of the Act, application for settlement could still be filed. Counsel further submitted that the entire version of the departmental authorities that the orders were tendered for service to the petitioner on 15.3.2016 is wholly unbelievable. Partners of the firm to whom the orders were allegedly tendered for service, have filed their affidavits denying such allegations. Counsel would h .....

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cation for settlement under subsection( 1) of section 245C of the Act is the date of service of assessment order and not the passing thereof. In this respect, counsel relied on the following decisions : 1) Collector of Central Excise, Madras v. M/s. M.M. Rubber and Co., Tamil Nadu reported in 1992 Supp(1) Supreme Court Cases 471. 2) Commissioner of Income-tax v. Income Tax Settlement Commission reported in (2015) 58 taxmann. Com 264 (Bombay). 3) Yashovardhan Birla v. Deputy Commissioner of Incom .....

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ssed on 15.3.2016 and were also sought to be delivered personally on the same day through the officers of the department but the partners of the firm refused to accept the same. He pointed out that the Assessing Officer, the Inspector who had tendered the assessment orders for service and the Joint Commissioner who had approved draft orders of assessment on 15.3.2016 have all filed their affidavits. Several registers maintained by the department in course of the business, contained corresponding .....

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hereafter, not be necessary to either dispatch or actually serve the order. According to him, therefore, the moment an order of assessment is passed, it would no longer be open for the assessee to apply for settlement of his case. In this context, counsel relied on the following decisions : 1) RM P R Viswanathan Chettiar v, Commissioner of Income-tax, Madras reported in 1954(25) ITR 79. 2) Badri Prasad Bajoria v. Commissioner of Income-tax, Central reported in 1967 (64) ITR 362. 3) Commissioner .....

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me day. The department points out that the draft orders of assessment were passed on 15.3.2016, sent to Joint Commissioner for his approval on 15.3.2016, who approved the same, sent back to the Assessing Officer on the same day upon which the Assessing Officer passed the orders of assessment on 15.3.2016 itself. The petitioner however, refused to receive the orders when tendered. 12. In this context, the Assessing Officer, the Deputy Commissioner of Income-tax, Baroda, in his affidavit dated 12. .....

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e assessment on 15.3.2016, they were also sent for service personally, by deputing an Inspector of his office, to the partners of the assessee firm at its office on 15.3.2016, however, the partners refused to receive the orders. A report to this effect was made by the Inspector, a copy of which has been produced along with this affidavit. Thereafter, the assessment orders were dispatched through speed post on 16.3.2016 at the last known address of the assessee which was returned as unserved with .....

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gone to the office of the Bafna Panchal Group to handover the assessment orders passed in cases of four assessees which included M/s. Shalibhadra Developers, present petitioner assessee and M/s. Shanti Buildcon, the petitioner of the connected petition. It is further stated that: 2. When we reached there at about 6 p.m., Shri Rajesh S. Bafna (Partner of M/s. Shanti Buildcon and M/s. Shalibhadra Developers) and Shri Mahendra R. Kankaria (Partner of M/s. Shanti Buildcon) were available in the Off .....

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ld not accept the Assessment Orders in these two cases as they are going to file a petition before the Hon'ble Settlement Commission, Mumbai. 14.The Assessing Officer has filed an affidavit in reply dated 1.9.2016 to the rejoinder of the petitioner in which he has stated interalia that draft orders for the assessment years in question were sent to the Joint Commissioner on 15.3.2016 along with a covering letter. The Joint Commissioner gave his approval for passing the assessment orders also .....

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es. As per the Inspector's report, the partners of the firm requested the officers to wait. After prolonged conversation with the authorised representatives, they refused to receive the orders late at night. The petitioner also refused to accept the envelope sent through speed post. 15.Along with this affidavit, the Assessing Officer has produced a letter dated 15.3.2016 written by him to the Joint Commissioner of Income-tax forwarding the draft assessment orders in respect of the present pe .....

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153D for the financial years 2012-2013, to 2015-2016. At serial no.194, one would find the entry pertaining to M/s. Shanti Buildcon, and at serial no.195 concerning M/s. Shalibhadra Developers. As per this register, both were received by the approving authority on 15.3.2016 and approved also on the same day. Yet another document produced along with this affidavit is a copy of letter dated 15.3.2016 written by the Joint Commissioner of Income-tax to the Assessing Officer, the Deputy Commissioner .....

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ocuments and other materials, the department would also refer to the notice of demand under section 156 of the Act which was issued against the petitioner on 15.3.2016 and a notice for penalty proceedings under section 271(1)(c) of the Act which was also issued on the same date. The department has produced before us, for our perusal, two registers, one is Current Demand and Collection register for the financial year 2015-2016 which contains a corresponding entry of assessment orders in case of M .....

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f assessment dated 11.3.2016 and followed by the order of assessment passed in case of some other assessee on 16.3.2016. This register does not contain any column for the date on which such entries were made. In that sense, therefore, this register is neutral. Counsel for the petitioner with whom we had shared this original register would however, draw our attention to a column pertaining to the date of service of notice of demand which in the present case was shown to be 21.3.2016. According to .....

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documents and materials on record, the petitioner relies on contents of the petition, but more importantly on the further affidavits filed in the present proceedings. At page404 of the compilation is the affidavit of one Kalpen K Doshi, partner of the petitioner firm, in which he has stated that the application for settlement was filed before the Commission on 16.3.2016 before 1:00 pm. On 15.3.2016, in the evening, the officers of the department had come to serve assessment orders of Shri Cheta .....

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as been filed on 20.8.2016 by Rajesh S. Bafna, partner of the petitioner firm. Another partner of the firm Mahendrakumar Kankaria has also filed affidavit dated 20.8.2016 along the same lines. In the affidavit in rejoinder dated 20.8.2016 sworn by Shri Kalpesh Kishorbhai Doshi, partner of the firm, same stand has been taken in more elaborate manner. 19. In addition to the affidavits of the Assessing Officer noted above, in which the stand of the department is stated and reiterated, we have sever .....

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and original for our perusal, is the register of Assessment Approval under section 153D. This register contains various approvals granted by the approving authority from the financial year 2012-2013 onwards. At serial nos. 194 and 195, in this register, we find, entries pertaining to M/s. Shanti Buildcon, and M/s. Shalibhadra Developers respectively. The years of assessment for which such approval was granted are mentioned. The date of receipt of the draft orders and the date of approval, both .....

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ntains several other entries for a period before and after 15.3.2016. 20.These registers which are maintained by the department in the ordinary course of business, thus contain various entries contemporaneously made concerning the present case. The outward movement of the draft orders, the receipt of such draft orders by the approving authority, the approval by the approving authority and forwarding and receipt of such approvals by the Assessing Officer are all thus documented. In addition to th .....

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e department, draft orders were passed on 15.3.2016, forwarded for approval to the Joint Commissioner on the same day, the Joint Commissioner approved the draft orders also on the same day, upon which, the Assessing Officer passed his orders of assessment on 15.3.2016. This may exhibit a certain anxiety or urgency shown by the department in passing orders of assessment and may also have the angle of thwarting the petitioner from approaching the Settlement Commission. However, this would not nece .....

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pt the department's version that the orders of assessment were actually passed on 15.3.2016. 21. If that be so, there is no reason why we should disbelieve the department's version that the same were also tendered for service on 15.3.2016. Even according to the petitioner, the department wanted to prevent the petitioner from applying for settlement. The petitioner also agrees that the two officers of the department, the Tax Inspector and the Tax Assistant personally visited the office of .....

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ng the petitioner from applying for settlement as the petitioner has vehemently averred, the most natural and logical step would be to serve the orders through same personal messengers who were carrying other assessment orders. We have in support of such version, the affidavit of the Inspector concerned who had personally visited the office of the petitioner firm and who even according to the petitioner had tendered the assessment orders in case of other assessees. 22. We also have on record a r .....

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vince us that the department is correct on both counts that the assessment orders were actually passed on 15.3.2016 and were sought to be served on the petitioner through personal messengers on the same date. The fact that the register referred to the date of service of the assessment order as 21.3.2016 would not be a clinching factor. It is not in dispute that the orders were actually delivered on the petitioners on 21.3.2016. Earlier attempt on part of the departmental authority to serve the o .....

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of the Act pertaining to service of notice generally. Subsection( 1) thereof provides that a service of notice or summon or requisition or order or any other communication under the Act may be made by delivering or transmitting a copy thereof, to the person therein, in different modes provided in clauses (a) to (d) of the said subsection. Clause (b) pertains to the manner as provided in Code of Civil Procedure for the purpose of service of summons. This in turn would lead us to Order V Rule 17 .....

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s on business and return the original to the Court from which it was issued with a report stating that he has so affixed the copy, the circumstances under which he did so and the name and address of the person by whom the house was identified and in whose presence the copy was affixed. According to the counsel this procedure was not followed by the visiting officials of the department. It is true that the Inspector of Income-tax and his colleague Tax Assistant did not follow with precision, requ .....

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have been served. 24. With this factual conclusions, we may assess the legal position. Chapter XIXA of the Act pertains to settlement of cases. Under subsection( 1) of section 245C of the Act, an assessee at any stage of a case relating to him can make an application for settlement in the prescribed manner. The term 'case' has been defined in clause(b) of section 245A as to mean any proceedings of assessment under the Act of a person in respect of any assessment year or assessment years .....

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sue of conclusion of an assessment since, as noted, an assessee can file an application for settlement at any stage of a case relating to him. In other words, if a case as defined in clause(b) of section 245A has concluded, application for settlement would not be maintainable. As per explanation (iiia) below the definition of term 'case', the assessment under section 153A would be deemed to conclude on the date on which the assessment is made. In plain terms, the language used is the dat .....

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d. Such time limit is laid down under section 153 of the Act. For example under subsection( 1) of section 153, it is provided that no order of assessment shall be made under section 143 or section 144 at any time after the expiry of twentyone months from the end of the assessment year in which the income was first assessable. Under subsection( 2) of section 153, it is provided that no order of assessment, reassessment or recomputation shall be made under section 147 after the expiry of nine mont .....

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se of R M P R Viswanathan Chettiar (supra), a Division Bench of Madras High Court considered a question whether the Tribunal was right in holding that the assessment in case was made within the period of limitation prescribed under section 34(2) of the Income Tax Act, 1922. This provision provided that no order of assessment or reassessment shall be made after expiry of four years from the end of the year in which the income, profits or gains were first assessable. In this context, the Court hel .....

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the tax due under Section 29 of the Act, that is, the sum payable by the assessee on the basis of the assessment of the income within the meaning of Subsections (1), (3) or (4) of Section 23. The assessment and the order of an assessment are steps to be taken by the Income-tax Officer. There is no question of anything further that has to be done by the assessee himself at that stage. As pointed out in ' (B)' itself, there could be no occasion to apply to such a case, the rule enunciated .....

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in writing on the person", who is directed to take the building down etc. Lord Watson observed at page 236: "But it is admitted that, although the Magistrate announced the terms of his judgment on the 24th of January, the order itself was not reduced to writing or subscribed by him until the 21st of March following. It was never served upon the person to whom it is directed; and the fact of a written order having been made did not come to his knowledge before the expiry of the day upon .....

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urned on the expression "on" and not so much as on the necessity to have the order in writing. There is no such provision in Section 23(3) of the Act, though, it requires an order of assessment to be in writing. 13. As we have already pointed out, the time limit of four years for which Subsection (2) of Section 24 provided was the period within which the Income-tax Officer had to complete one stage of the proceedings, that is, the assessment of the income and the determination of the t .....

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s Court as well as by the Judicial Committee that the words "assessment" and the "assessee" are used in different places in the Act with different meaning. Therefore in finding out the true meaning of those words in any provision, we have to see to the context in which the word is used and the purpose intended to be achieved. It is true that subss. 1, 3 and 4 of s.23 require the Income-tax Officer to "assess the total income of the assessee and determine the sum payable .....

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sion that the word "assessment" in proviso to s.34(3) means not merely the computation of the income of the assessee but also the determination of the tax payable by him. No other High Court has taken a contrary view. The Revenue must have in all these years acted on the basis of that decision of the Madras High Court. Interpretation of a provision in a taxing statute rendered years back and accepted and acted upon by the department should not be easily departed from. It may be that an .....

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that we would be justified in departing from the interpretation placed by the Madras High Court in Viswanathan Chettiar's case, though a different view of the law may be reasonably possible. 29. In case of K N K Keddy (supra), Division Bench of Karnataka High Court considered a question whether within the meaning of section 275 of the Act, penalty order must not only be made within two years of the completion of proceedings for the imposition of penalty but also communicated to the assessee .....

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is "made" and the expression used in section 275 is "passed". It is, therefore, obvious that no special significance need be attached to the use of the expression "passed" and that it is synonymous with the expression "made". We, therefore, reject the contention urged for the assessee that the expression "passed" should be construed differently from the expression "made". 17. This court in Esthuri Aswathiah v. Commissioner of Income-tax .....

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itation as the order was not communicated to the assessee within four years from the end of assessment year and the order can be said to have been made only when the order was communicated to the assessee. That was not accepted. In the reference to the High Court, a similar argument was reiterated. This court rejected the contention referring to the ruling of the High Court of Madras in Viswanatha Chettiar v. Commissioner of Income-tax This court held that section 34(3) did not speak of any comm .....

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n. But the learned judges held that those cases were not apposite for deciding the matter in issue. It is, therefore, seen that, so far as the Income-tax Act is concerned, the expression "making of an order" has been construed as implying the signing of the order and not its communication and this view has been taken by this court as well as the High Courts of Madras and Calcutta. We have earlier held that no distinction is possible to be made between the use of the expression "ma .....

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r within the time prescribed in section 275. 18. Having regard to the view taken in the three cases referred to above, we hold that passing of the order imposing penalty was on 31st March, 1965, within two years as prescribed in section 275 of the Act and the communication of the order subsequently did not affect the validity of the order imposing penalty. We, therefore, answer the question referred to us thus : "The order imposing penalty under section 271(1)(c) should be passed within two .....

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t served on the assessee on 20.4.1979 would be deemed to have been passed on 20.4.1979 and, therefore, barred by limitation. In this context it was held and observed as under : 4. The word to be noticed is "made". It must be remembered that an order of assessment is not an administrative order, but a quasijudicial order. It is true that an order of assessment may not have been made in the presence of the assessee and that it requires to be communicated, but still, its character as a qu .....

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ith the word " served". Section 18(2A) confers a right on the assessee to seek waiver or reduction of the penalty if he files a return before the WTO " issues" the notice. We are afraid, the principle of the said judgment can have no application here for more than one reason, that not only the expression construed is different, but that there is also a distinction between a notice and an order of assessment. Mr. Dasaratharama Reddy then relied upon the decision of the Supreme .....

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me effective only on its receipt by the concerned Government servant. It was held that the communication is complete once the order is put in the course of transmission and thus goes out of the control of the authority passing it. Be that as it may, the said principle applicable in the case of administrative orders cannot be extended to or applied in the case of quasijudicial orders passed by the authorities in exercise of their quasijudicial function. Indeed, we may refer to a decision of this .....

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t be deemed to have been made on the date on which it purports to have been made. Mr. Dasaratharama Reddy contended that this decision requires reconsideration in the light of the decisions of the Supreme Court in CWT v. Kundan Lal Behari Lal [1975] 99 ITR 581(SC) and State of Punjab v. Khemi Ram. We are not prepared to agree for the reasons already assigned. In CWT v. Kundan Lal Behari Lal (1975) 99 ITR 581 (SC), the language was different and the other decision of the Supreme Court pertains to .....

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emphasized on the expression assessment made and equated with the order of assessment being passed. In context of the settlement proceedings, identical expression has been used. An assessment would be deemed to be concluded on the date on which the assessment is made. We do not see any reason to interprete this expression any differently. It is true that both the expressions are used in different context. Nevertheless, there are other reasons why even otherwise, we would not depart from what has .....

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lication under subsection( 1) of section 245C of the Act. Upon an application for settlement being filed, the same would pass through various stages envisaged in section 245D of the Act. Under subsection( 2) of section 245F, where an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall, until an order is passed under subsection (4) of section 245D, have exclusive jurisdiction to exercise the powers and perform the functions .....

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lement Commission. Subsection( 7) of section 245D however, provides that where a settlement becomes void, proceedings with respect to the matters covered by the settlement shall be deemed to have been revived from the stage where the application was allowed to be proceeded with by the Settlement Commission and the income-tax authority concerned, may, notwithstanding anything contained in the provisions of the Act, complete such proceedings at any time before the expiry of two years from the end .....

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in the Settlement Commission. If for some reason as envisaged under section 245D of the Act, proceeding for settlement becomes void, under subsection( 7) thereof, the proceedings before the Assessing Officer would be deemed to have revived upon which he would complete the assessment within the extended time frame provided therein. The overwhelming intention of the legislature thus is that there can be only one order concerning an assessment, be it by the Assessing Officer termed as order of asse .....

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ssment would be deemed to be pending. For the purpose of section 143 or section 147 as the case may be, the order of assessment would be deemed to have been passed. The Settlement Commission thereafter, would be authorised to proceed and process the application for settlement and as a natural consequence, pass an order of settlement. There is no provision, to our mind, under which the order of assessment already passed by the Assessing Officer under such a situation would be obliterated. Surely, .....

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same day in the morning. Such post returned as unserved as refused. However, such refusal was after the date on which the application for settlement was presented before the Commission. In such background, the Court upheld the view of the Settlement Commission that the word 'issued' should be interpreted as served and that delivery of envelope to the postal authority on 18.3.2013 cannot be termed as service to the applicant. One of the factors which weighed with the Bombay High Court in .....

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igh Court in case of Yashovardhan Birla (supra), after issuance of the circular by CBDT dated 17.11.2014, the Revenue contended that earlier decision in case of Income Tax Settlement Commission (supra), would not hold good. Such contention was rejected by the Bombay High Court interalia on the premise that the Board circular cannot overrule the High Court judgement. It was also observed that the decision of the Court did not rest on the circular dated 12.8.2008. 35. In case of Vishnu Steels (sup .....

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ven purposive interpretation. 36. In case of Mohit Gupta (supra), Division Bench of Delhi High Court was examining a similar question in the background of settlement provisions contained in the Central Excise Act, wherein a case would be pending if the adjudicating authority has not adjudicated the proceedings. In the said case, the adjudicating authority had passed an order on 24.12.2009 and was served on the petitioner on 8.1.2010 which was the date on which the petitioner had filed the applic .....

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have seen, the order in original dated 24.12.2009 had left the office of the said Commissioner on 31.12.2009 and was beyond his reach and control. Consequently, the adjudication becomes effective and complete on that date, i.e. 31.12.2009. That being so, the necessary pre condition of a case pending adjudication on the date of the settlement application is not satisfied. As such, the Settlement Commission had no jurisdiction to entertain the plea of settlement. Because, it is only a case as def .....

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ending before an adjudicating authority till the order does not go out of his control. In the present case, this happened on 31.12.2009. Thus, on 08.01.2010, when the settlement applications were filed by the petitioners, the matter before the adjudicating authority had already been adjudicated. 37. Thus between the views of Bombay High Court and Delhi High Court also there is divergence. Bombay High Court holds, the date of service of assessment order is the crucial date only after which applic .....

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ation where an order of assessment is already passed, but neither dispatched nor served to the assessee, application for settlement would be maintainable, upon which, the Settlement Commission would have the exclusive jurisdiction to pass appropriate order in terms of section 245D and other provisions of the Act. At the same time order of assessment which has been passed would survive without any mechanism for either annulling such order or providing for primacy of the order of Settlement Commis .....

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nly on the date of service of assessment order to the applicant. In the circular dated 17.11.2014, it has been provided that the assessment shall be deemed to have been completed on the date on which the assessment order is passed. At best, this circular neutralised the earlier clarification of the Board that assessment shall be deemed to be complete only upon the order of assessment being served on the applicant. 39.The decision in case of M/s. M.M. Rubber and Co., Tamil Nadu (supra) of the Sup .....

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assessment is made. However, in context of limitation concerning the assessee's revision it was held that the period of limitation would commence from the date of communication of the order. In paragraph 18, the Court observed as under : 18. Thus if the intention or design of the statutory provision was to protect the interest of the person adversely affected, by providing a remedy against the order or decision any period of limitation prescribed with reference to invoking such remedy shall .....

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