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Vikas Shipping Corporation & 1 Versus Union of India & 3

2017 (9) TMI 849 - GUJARAT HIGH COURT

Settlement Commission Orders - Commission declared that the proceedings had abated due to non compliance by the petitioner with the provisions of section 245D(2D) of the Act and the Assessing Officer would now dispose of the case in accordance with the provisions of subsections 2, 3 and 4 of section 245HA - Held that:- The statute does not make any distinction whether the proceedings were pending before the Settlement Commission at prehearing stage or at the stage where the hearing was over and .....

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of hearing whether the requirement of payment of tax and interest as contained in subsection( 2D) of section 245D has been fulfilled by the petitioner. As is evident from the petitioner's letter dated 31.7.2007 written to the Settlement Commission in response to the said communication, the petitioner received the same on 13.7.2017 itself. - Well before the final date of 31.7.2017 for payment of additional tax and interest, the petitioner at any rate was aware that the proceedings before th .....

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f law. The Settlement Commission had no other alternative. - The alternative request of preventing the income-tax authority from using the material on record before Settlement Commission cannot be accepted in terms of plain language used in subsection( 3) of section 245HA of the Act. As noted, the petitioner has not challenged the vires of this provision. - Special civil Application No. 6854 of 2008 - Dated:- 7-9-2017 - MR. AKIL KURESHI AND MR. BIREN VAISHNAV, JJ. For The Petitioner : Mr S M .....

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ed before the Settlement Commission. 2. Facts of the case are as under. The petitioner is a partnership firm. The petitioner had applied to the Commission for settlement of its disputed assessment proceedings for the assessment year 1997-1998, 1998-1999 and for the block period ending on 10.12.1997. It is undisputed that the hearing in the proceedings before the Settlement Commission was completed on 8.11.2006 and the proceedings were pending for final order to be passed by the Settlement Commis .....

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e now provided for abatement of the settlement proceedings if such amount was not paid within the prescribed time. As per subsection( 3) of section 245HA which was newly inserted, the material produced by the assessee before the Settlement Commission and that collected by the Settlement Commission through inquiries pending the settlement proceedings and the evidence brought on record could be utilised by the Assessing Officer or the incometax authority in proceeding further with the pending case .....

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n on 07.08.2007 at 11.00AM in the Court room of the Income Tax Settlement Commission, Additional Bench, Mumbai. 2) You may appear before the Income Tax Settlement Commission either in person or through a representative duly authorised in this behalf. 3) If the appellant or Commissioner of Incometax wish to rely on any evidence/documents/ paper etc. during the hearing, the same should be furnished to the Commission in the form of a paper book in six (6) copies duly indexed and page numbered at le .....

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was requested to state the position of payment of taxes & interest as per the provision of section 245(2D) at the time of hearing before the Commissioner . The petitioner replied to the said letter on 13.7.2007 itself. As per its own letter dated 31.7.2007, in response to the notice issued by the Settlement Commission, the petitioner stated as under : 1. A notice fixing the hearing in the aforesaid settlement application has been received by us on 13.07.2007 as per which the matter is fixed .....

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date. 4. In the circumstances, the present notice of hearing, it appears has been issued wrongly. 6. The Settlement Commission passed the impugned order dated 11.12.2007 by which the Commission declared that the proceedings had abated due to non compliance by the petitioner with the provisions of section 245D(2D) of the Act and the Assessing Officer would now dispose of the case in accordance with the provisions of subsections 2, 3 and 4 of section 245HA. It is in this background the petitioner .....

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on( 3) of section 245HA. We had upheld the vires making the following observations : 11. Prior to 1.6.2007 amendment, there was no requirement for an assessee to make payment of additional tax with interest along with the application filed under subsection( 1) of section 245C of the Act, though subsections (1B), (1C) and (1D) provided the manner in which such additional tax and interest would be computed. Under subsection (2A) of section 245D, the assessee within thirtyfive days of the receipt o .....

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e Commission could also grant installments. As per subsection( 2C) of section 245D, whenever additional tax was not paid within the time prescribed under subsection( 2A), irrespective of the fact whether the Settlement Commission had extended the time for payment, the assessee would be liable to simple interest at the prescribed rate on the amount which remained unpaid. After the expiry of the period specified in subsection( 2A), under subsection( 2D) of section 245D, the additional tax which re .....

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sage that the settlement application would abate on account of nonpayment. We may notice that under subsection( 1A) of section 245H, if the assessee fails to pay the sum specified by the Settlement Commission in its order under subsection( 4) of section 245D within the specified or extended time, the immunity granted by the Commission from penalty or prosecution be withdrawn. Under section 245J, the amount ordered by the Settlement Commission to be paid under subsection( 4) of section 245D could .....

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o 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 subsectio .....

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plication was made under section 245C before the 1st day of June, 2007, but an order under the provisions of subsection (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, has not been made before the 1st day of June, 2007, such application shall be deemed to have been allowed to be proceeded with if the additional tax on the income disclosed in such application and the interest thereon is paid on or before the 31st day of July, 2007. Explanation.-In r .....

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tlement Commission shall abate on the specified date. Explanation.-For the purposes of this subsection, specified date means- xxx (b) in respect of an application referred to in clause (ii), the 31st day of July, 2007; xxx (2) Where a proceeding before the Settlement Commission abates, the Assessing Officer, or, as the case may be, any other incometax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provision .....

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oduced before the Assessing Officer or other incometax authority or held or recorded by him in the course of the proceedings before him. 13. The comparison of the statutory provisions before and after amendment with effect from 1.6.2007 would show that even earlier the assessee always had a liability to pay the tax on additional income disclosed in the application for settlement filed before the Commission. Such liability would be discharged within thirtyfive days of the receipt of a copy of the .....

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n could also direct payment of tax with interest or even impose penalty on the assessee not paying the same. The statutory provisions however, did not provide for abatement of proceedings if the assessee failed to make payment of tax or interest nor would the Settlement Commission refuse to dispose of the application on the ground of non payment thereof. The fall out of non payment of the tax and interest could be traced to Subsection( 1A) of section 245H as per which the immunity granted by the .....

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mission. The result of non payment would be two fold. One, the immunity from penalty and prosecution if granted by the Settlement Commission would stand withdrawn and two, the department would recover the unpaid dues in accordance with the provisions of Chapter XVII of the Act. 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, .....

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uch 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 subsection (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 .....

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lature introduced the concept of extremely short time limits for crossing the first stage of allowing or not allowing an application for settlement to be proceeded further. Under this provision, on receipt of an application under section 245C, the Settlement Commission within seven days from the date of receipt of the application, shall issue a notice to the applicant requiring him to explain why the application should be allowed to be proceeded with. After hearing the applicant, the Settlement .....

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son the Settlement Commission is unable to pass an order allowing or not allowing the application to be proceeded further, the deeming fiction would apply and the application would be deemed to have been allowed to be proceeded with. Subsection (4A) was added to section 245D requiring the Settlement Commission to pass an order under subsection (4) within a time frame. The applications pending at the time of statutory changes shall be decided before 31st March, 2008, those made on or after 1st Ju .....

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oceedings before the Settlement Commission would abate. 17. We are conscious that the said time limit provisions contained in the amended section 245D of the Act have been explained by the Bombay High Court in case of Star Television News Ltd. (supra) reading down the rigid requirement holding that if the assessee is not responsible for causing delay in disposal of the case, the same would not abate for the Settlement Commission not being able to dispose of the same within the prescribed time. N .....

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erested in knowing the outcome of settlement proceedings so that if a case is settled, the ordinary assessment proceedings would be rendered inconsequential. If on the other side, for whatever reason, the application for settlement were to fail, the pending assessment would revive and be continued from whatever stage it was pending. The statutory provisions under challenge before us therefore, must be seen in light of the over all relevant changes made by the legislature and the ultimate effect .....

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itutional provision. It is in fact, within these two grounds of challenge to a statute, the Supreme Court in case of Shayara Bano (supra) has expanded to a limited extent the scope of examination, propounding that the legislation can also be struck down on the ground of arbitrariness. Nevertheless, the concept of arbitrariness in context of testing a statutory provision made by the parliament or the State legislature cannot be put in a golden scale. If the legislature in its wisdom applying its .....

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which permitted a classification of Assistant Engineer between Diploma holder and Degree holder for promotion as Executive Engineer. The Constitution Bench of the Supreme Court observed that in order to establish that the protection of the equal opportunity clause has been denied to them, it is not enough for the respondents to say that they have been treated differently from others, not even enough that a differential treatment has been accorded to them in comparison to others similarly circums .....

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ive competence on which the plenary legislation is also subject or being ultra vires the Constitution, as also additional grounds such as, being ultra vires the parent statute or being in conflict with any other statute or being so arbitrary that it could not be said to conform to the statute or violative of Article 14 of the Constitution 21. It was argued that these amendments may act somewhat harshly on the assessees and particularly when such amendments are applied to pending applications for .....

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he admitted income, the income which the assessee had not disclosed in the original return filed before the Assessing Officer but which he now admits in the application for settlement filed before the Commission. No tax payer can claim liberty from payment of tax on an admitted income. Secondly, even in the provisions prevailing upto 1st June 2007, there was always the liability of the assessee applying for settlement to pay the additional tax on the income disclosed. If he failed to pay the sum .....

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the tax on admitted income. What the statute perhaps cannot take away is a vested right and not a perceived right in which the assessee had no vested interest. 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 so abate, the Assessing Officer or the incometax authorities before whom the proceedings at the time of making of the applicatio .....

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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 .....

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the settlement proceedings related. All that perhaps materially changed is that insofar as the material, other information produced by the assessee before the Commission is concerned, it would partake the character of the same having been produced by the assessee before the Assessing Officer or the incometax authority. Surely, no assessee can claim immunity from use of such material unless such immunity was granted in specific terms of statute. No assessee can claim that he made a certain declar .....

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yed by the assessee. In the result, the challenge to the vires of the statutory provisions must fail. 7. Shri Soparkar however submitted that the Settlement Commission did not dispose of the proceedings for a long time after conclusion of the hearing, as a result of which the liability to pay additional tax before 31.7.2007 arose. Had the Settlement Commission disposed of the proceedings promptly, this situation would not have arisen. In any case, the petitioner was not aware that the Settlement .....

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re was deliberate delay on their part. If therefore, when the settlement proceeding was still pending, amendments were made in the statute which applied to such pending proceeding, same had to be applied with full force. The statute does not make any distinction whether the proceedings were pending before the Settlement Commission at prehearing stage or at the stage where the hearing was over and the case was pending for disposal by the Settlement Commission. 9. The defence that the petitioner w .....

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ection 245D has been fulfilled by the petitioner. As is evident from the petitioner's letter dated 31.7.2007 written to the Settlement Commission in response to the said communication, the petitioner received the same on 13.7.2017 itself. Well before the final date of 31.7.2017 for payment of additional tax and interest, the petitioner at any rate was aware that the proceedings before the Settlement Commission was not yet disposed of. The petitioner therefore had the responsibility to pay th .....

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