2023 (11) TMI 1111
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....s (in W.P.No.13445 of 2023) For the Petitioner(s) : Mr. R. Sivaraman, Assisted by M/s.Vandana Vyas (for rest of the W.P's) For the Respondent (in all cases) : Mr. A.R.L. Sundaresan, Additional Solicitor General of India. Assisted by Mr. Rajesh Vivekanathan, Deputy Solicitor General of India. (for R1), Mr. A.P. Srinivas, Senior Standing Counsel. and Mr. ANR. Jayaprathap, Junior Standing Counsel. (for R2 & R4) COMMON ORDER MR. JUSTICE. D.BHARATHA CHAKRAVARTHY All these writ petitions are connected to each other and are filed with two sets of prayers. The petitioners pray for a writ of declaration, declaring the amendment to the Income Tax Act, 1961 in Section 245-A by inserting Sub-Clause (da), (ea) and (eb), 245B, 245BC,245BD, proviso to 245C, 245D, 245DD, 245F, 245G, 245H and insertion of new Section 245AA and 245M by way of Sections 54 to 65, Finance Act, 2021 with retrospective effect from 01.02.2021 as arbitrary, illegal and void and infringing the fundamental rights conferred under Article 14,19(i)(g), 20, 20 (2) and 21 of the Constitution of India, 1950, thus unenforceable and unconstitutional. 2. The petitioners also challenge the order issued by the Department of R....
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....ers under Section 119(2) of the Act, a press release was issued on 07.09.2021 and thereafter an Order in the nature of a Trade Circular was issued on 28.09.2021 extending the time limit for filing applications before the Interim Board upto 30.09.2021. However, paragraph (4) of the said Order reads thus:- "4. The above relaxation is available to the applications filed:- (i) by the assessees who were eligible to file application for settlement on 31.01.2021 for the assessment years for which the application is sought to be filed (relevant assessment years); and (ii) where the relevant assessment proceedings of the assessee are pending as on the date of filing of the application for settlement. " 7. As a matter of fact, immediately after the introduction of the Bill before the Parliament, fresh applications were not accepted before the ITSC as such, several petitioners had approached the Courts of law and upon directions of Court their applications were received and are pending. After the extension of time upto 30.09.2021, in some cases, the applications were rejected on the ground that the Orders/Notices of re-opening etc., were issued on or after 01.02.2021, by considering th....
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.... extend the last date not the operation of the provisions of ITSC beyond the date of its abolition. 10. We have heard the Learned Counsel Appearing on behalf of the Petitioners. Mr. J.D.Mistry, the Learned Senior Counsel led the arguments on behalf of the petitioners in detail, while the other Learned Counsel adopted and supplemented to his submissions. Mr. A.R.L. Sundaresan, the Learned Additional Solicitor General of India, argued on behalf of the respondents. 11. Mr.J.D. Mistry, the Learned Senior Counsel after taking us through the specific facts in respect of W.P. No.13554 of 2021, would submit that it can be seen that in all these matters searches were conducted and documents were called for well before 31.01.2021. For the reasons best known to them, the authorities issued the notice of re-opening only after 31.01.2021 and thus, the very right of approaching the ITSC now in the scheme of things stood dependent on the vagaries of action being taken by the authorities as per their convenience. In any event, the impugned enactment came to be notified only on 01.04.2021. He would submit that 'Case' is defined under Section 245A(b) as under :- "(b) "Case" means any proceedings....
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....strative relief to the taxpayer and not for the purpose of imposing a burden on him. ... ." 16. The Judgment of the Supreme Court of India in, Reliance Jute Industries Ltd -Vs- Commissioner of Income Tax [1979 2 TAXMAN 417 SC], was relied upon, referring to paragraph 6 to contend that it is a cardinal principle of the tax law that the law to be applied is that which is in force for the assessment year unless otherwise provided expressly or by necessary implication. The assessees had a vested right to approach ITSC as per the law in force for the assessment year. 17. He would further rely upon the Judgment of the Supreme Court of India in, Uco Bank -Vs-Commissioner of Income Tax [1999 104 TAXMAN 547 SC], of which the relevant portion of the paragraph 18 is extracted hereunder for ready reference :- "18. .... The relevant circular of CBDT cannot be ignored. The question is not whether a circular can override or detract from the provisions of the act; the question is whether this circular seeks to mitigate the rigour of particular section for the benefit of the assessee in certain specified circumstances. So long as such a circular is enforce, it would be binding on the department....
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....nd others (Civil Appeal Nos. 297-298 of 2022, dated 11.01.2022), and the relevant paragraph 47 reads as under :- "47. The exposition of legal principles culled out is that an amendment having retrospective operation, which has the effect of taking away the benefit already available to the employee under the existing rule, indeed divest the employee from his vested or accrued rights and that being so, it would be held to be violative of the rights guaranteed under Article 14 and 16 of the Constitution" 21. The Judgment in, Union of India & Others -Vs- Tushar Ranjan Mohanty and others [1994 5 SCC 2020], is pressed into service for the proposition that when the petitioners' applications were taken on file pursuant to orders of Courts of law, then the retrospective legislation which makes the relief obtained nugatory would be illegal. The relevant passage in paragraph 14 is as follows :- "14. The legislatures and the competent authority under Article 309 of the Constitution of India have the power to make laws with retrospective effect. This power, however, cannot be used to justify the arbitrary, illegal or unconstitutional acts of the executive. A person is deprived of an accrue....
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.... it does to us that the pensioners for the purpose of pension benefits form a class, would its upward revision permit a homogeneous class to be divided by arbitrarily, fixing an eligibility criteria unrelated to purpose of revision, and would such classification be founded on some rational principle? The classification has to be based, as is well settled, on some rational principle, and the rational principle must have nexus to the objects sought to be achieved. ..." 25. On behalf of the petitioners, the decision of the Learned Single Judge of the Calcutta High Court in W.P.A.No.3048 of 2022, along with the Order of stay granted by the Division Bench in M.A.T.No.375 of 2022 are also produced. 26. On the basis of all the above, the learned Senior Counsel would submit that the grievance of the petitioners will stand addressed even by reading down of circular. In the event of the circular being found to be in order, the petitioners press for the submissions relating to the unconstitutionality of the impugned provisions. 27. Per contra, Mr. A.R.L.Sundaresan, the Learned Additional Solicitor General of India, would submit that the purpose of the impugned legislation itself is to do a....
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....at it does not take away or abridge any of the fundamental rights enumerated in Part - III of the Constitution or any other constitutional provisions.." "32. While dealing with constitutional validity of a taxation law enacted by Parliament or State Legislature, the court must have regard to the following principles: (i), there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature. (ii), no enactment can be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found. (iii), the court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence(iv), hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law and... (v), in the field of taxation, the Legislature enjoys greater latitude for classification." 30. The Learned Additional Solicitor General of India would submit that there was no ves....
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....725], to contend that not only there is power to amend, repeal or supersede, such powers can be exercised retrospectively also. The exercise cannot be unreasonable because the restrospectivity was only 2 months and no unforeseen financial burden arises on account of such amendment. Paragraphs 20, 21, 22, 28 and 29 were referred to. The necessary passages are extracted below:- "20. The competence of parliament and the State legislatures to repeal, amend or supersede an exemption notification is unquestionable. The power to do so retrospectively cannot be and is also not doubted. ...... 21. A law cannot be held to be unreasonable, merely because it operates retrospectively. ...... ...The unreasonability must lie in some other additional factors. The retrospective operation of a statute would have to be found to be unduly oppressive and confiscatory before it can be held to be so unreasonable as to violate the constitutional norms...... 22. The factors which are generally considered relevant in answering this question are: (I) the context in which the retrospectivity was contemplated; (ii) to the period of such retrospectivity and ; (iii) the degree of any unforeseen or unfore....
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....al inasmuch as it has given retrospective application with effect from 01.02.2021? (iii) To what reliefs, the petitioners are entitled ? Question No.i : 35. The impugned circular is issued in the exercise of power under Section 119(2) of the Act. The offending clause 4(i) is extracted supra in paragraph No.6 above. On a consideration of the decisions relied on by both sides and submissions made, to answer the question in the present context of the case, it is clear that a circular issued by the respondents under Section 119 of the Act: (i) would be binding on the departmental authorities; (ii) It is issued to ensure uniform and proper administration and the application of the Income Tax Act; (iii) It cannot add any new condition or anything contrary to the statute; (iv) But, in order to mitigate the rigor of the provisions for the benefit of the assessees in certain specified circumstances, it can even travel beyond so as to grant administrative relief to the taxpayer, but, it shall not impose any new burden on him. 36. In that conspectus, with the Finance Act, 2021, in the background as such, it can be seen that by virtue of proviso to Section 245B, the ITSC is made inoperati....
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.... further submission is that the vested rights are taken away by fixing an artificial cut-off date. In this regard, the contention on behalf of the State is that the settlement itself is concession and therefore, the writ petitioners cannot claim any vested right. We are unable to countenance the said argument on behalf of the State. It may be true that the orders passed by ITSC containing terms of settlement has the trappings of concession and benevolence showered by the State to a particular assessee. But, such benevolence, concession etc., are exercised by the State through a statutory regime. Under the statute, the assessees are entitled to approach the appropriate authority seeking such concession/benevolence. Therefore, the question with which we are concerned is the 'right to approach' the ITSC which is a statutory right conferred by Chapter XIX-A of the Act, more specifically, Section 245C of the Act by filing an application. Therefore, the assessees had a statutory right to approach the ITSC. Like any other appellate or revisional remedy which is a creature of statute, to right to seek resolution through ITSC was also conferred by the statute. Of course, it is well within t....
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....ay a vested right, it must do so by providing expressly or by necessary intendment. We step back and read the Amending Act namely, the Finance Act, 2021 carefully. While the ITSC is made inoperative with effect from 01.02.2021 and an Interim Board is set up, provisions are made to transfer pending applications, absolutely, the Amending Act or the entire Chapter XIX-A as it stands after the amendment, does not expressly deal with or provide anything by necessary intendment regarding those applications which are made or the eligible cases in the interregnum. This being so, the ratio of the Judgment of the Hon'ble Supreme Court of India, in Commissioner of Income Tax -Vs- Shah Sadiq & Sons (cited supra) would apply in all force that a right which had accrued to approach the ITSC till the notification of the Finance Act, 2021 on 01.04.2021 stood vested in the eligible assessees and the said rights continued to be capable of being enforced notwithstanding the amendment of the relevant provision. 39. As a matter of fact, the applications are either made by the petitioners or on direction by the orders of the Court as the ITSC was in the statute book in the interregnum period before ....
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....for which it was created and should not be extended beyond that legitimate field". This was reiterated in CIT v. Amarchand N. Shroff [AIR 1963 SC 1448 : 1963 Supp (1) SCR 699, 709 : (1963) 1 SCJ 411], Maharani Mandalsa Devi v. M. Ramnarain (P) Ltd. [AIR 1965 SC 1718 : (1965) 3 SCR 421, 424 : (1965) 2 SCJ 853] and CIT v. Vadilal Lallubhai [(1973) 3 SCC 17, 22 : 1973 SCC (Tax) 1, 6 : AIR 1973 SC 1016 : (1973) 1 SCR 1058, 1064]. Assuming, therefore, that an application for variation of the conditions of a permit referred to in subsection (8) of Section 57 is to be deemed by a fiction of law to be an application for the grant of a new permit, the question to which we must address ourselves is for what purpose is such an application for variation deemed to be an application for grant of a new permit." Therefore, when we consider the instant case, the purpose of the retrospective legislation is to make the ITSC inoperative right from the date of the introduction of the Bill and to send all the pending applications to the Interim Board. Therefore, fixing the last date for filing the applications alone travels beyond the purpose and results in more retrospectivity than which is needed a....