Friends SPS International India (P) Ltd. & Ors. Vs. ACIT / DCIT & Ors. (Rajasthan High Court)
Summary: The Rajasthan High Court, Jaipur Bench, in Friends SPS International India (P) Ltd. & Others v. Assistant Commissioner of Income Tax / Deputy Commissioner of Income Tax & Others, D.B. Civil Writ Petition No. 3372/2021 and connected petitions, decided on 26 March 2025, directed the Interim Board for Settlement to consider the petitioners’ income-tax settlement applications in accordance with law, taking into account the CBDT Order dated 28 September 2021 issued under Section 119(2)(b) of the Income-tax Act, 1961. The dispute arose following the abolition of the Income-tax Settlement Commission through the Finance Act, 2021 and the consequential restrictions on filing settlement applications. The petitioners sought directions requiring the Settlement Commission to accept their applications notwithstanding the legislative changes. The Court disposed of the connected writ petitions after noting that the CBDT had extended the period for filing qualifying settlement applications up to 30 September 2021.
The High Court decided four connected writ petitions involving Friends SPS International India (P) Ltd. and associated petitioners, Tara Chand Kanoongo and others, Alok Kumar Gupta, and Vishnu Kumar Gupta. For convenience, the Court considered the facts of D.B. Civil Writ Petition No. 2192/2021. Following search proceedings, the petitioners in that case had received notices dated 20 March 2020 under Section 153A of the Income-tax Act for Assessment Years 2013-14 to 2018-19. Subsequently, the Finance Act, 2021 amended Section 245B and provided that the Income-tax Settlement Commission would cease to operate after 1 February 2021. Section 245AA was introduced for constitution of the Interim Board for Settlement to deal with pending applications.
The petitioners submitted that their settlement applications under Section 245C of the Income-tax Act, 1961 had not been accepted in view of the Finance Act, 2021 amendments. During the pendency of the writ proceedings, an interim order dated 22 February 2021 directed the respondents to accept the settlement applications as an interim measure. Pursuant to that direction, the petitioners filed an application on 26 February 2021 and made the requisite pre-deposit. The dispute was subsequently considered in the light of the CBDT’s administrative relaxation for settlement applications affected by the transition from the Settlement Commission to the Interim Board.
The CBDT, exercising its powers under Section 119(2)(b), issued an Order dated 28 September 2021 to address difficulties faced by taxpayers who were at an advanced stage of preparing settlement applications when the Settlement Commission was discontinued, as well as hardships arising during the COVID-19 pandemic. The Order authorised the designated Commissioner of Income-tax to receive applications filed after 31 January 2021 and before 30 September 2021 and process qualifying applications as pending before the Interim Board. The relaxation was subject to specified conditions, including that the assessee should have been eligible to file an application on 31 January 2021 and that the relevant assessment proceedings should be pending on the date of filing.
The High Court observed that, in view of the CBDT Order, the issue raised in the petitions required no further adjudication at that stage. It expressly clarified that it had not examined or determined whether the petitioners satisfied the eligibility requirements under Section 245C. Since the petitioners had filed their applications before the extended deadline of 30 September 2021, the Court directed the Interim Board to consider the applications in accordance with law while taking into account the CBDT Order dated 28 September 2021.
The connected writ petitions were accordingly disposed of without deciding the other issues raised. The ruling is therefore confined to a direction for consideration of the applications and should not be construed as a final declaration of eligibility or an order granting settlement. The Court also did not adjudicate upon the validity of the additional eligibility conditions contained in the CBDT Order. Those issues remained outside the scope of the operative determination in the supplied judgment.
FULL TEXT OF THE ORDER OF RAJASTHAN HIGH COURT
1. These petitions are being decided by common order as the facts involved are similar. For convenience, the facts are being taken from D.B. Civil Writ Petition No.2192/2021.
2. This petition is filed seeking directions to respondent No.2-Income Tax Settlement Commission to accept the application of the petitioners.
3. The brief facts are that in pursuance to a search conducted, petitioners were issued notices dated 20.03.2020 under Section 153A of the Income Tax Act, 1961 (for short ‘the Act’) relating to assessment years 2013-14 to 2018-19. By the Finance Act of 2021, provision of Section 245B was amended and proviso was added to the effect that Income-tax Settlement Commission so constituted u/s 245B of the Act shall cease to operate after 01.02.2021. Section 245A was amended and clauses were added. By insertion of Section 245AA, Interim Board for Settlement (for short ‘Interim Board’) was to be constituted for settling the pending applications. The petitioners filed this writ petition pleading that the application filed u/s 245C of the Act was not accepted by the department consequent to Finance Act of 2021. Vide order dated 22.02.2021, respondents were directed to accept the application as an interim measure. In pursuance to the interim direction issued by this Court, the petitioners on 26.02.2021 filed an application u/s 245C of the Act and made required pre-deposit. In view of the amendment brought by Finance Act, 2021 and prevailing COVID-19 situation, Central Board of Direct Taxes (for short ‘the Board’) issued Circular dated 28.09.2021 u/s 119(2)(b) wherein, time for assessees eligible to make application for settlement on 31.01.2021 was extended upto 30.09.2021.
Circular is reproduced below:-
“Subject: Order under section 119(2)(b) of the Income Tax Act, 1961 for filing applications for settlement before the Interim Board for Settlement – reg.
The Finance Act, 2021 has amended the provisions of the Act to inter alia provide that the Income-tax Settlement Commission (lTSC) shall cease to operate with effect from 01.02.2021. Further, it has also been provided that no application for settlement can be filed on or after 01.02.2021, which was the date on which the Finance Bill, 2021 was laid before the Lok Sabha. In order to dispose off the pending settlement applications as on 31.01.2021, the Central Government has constituted Interim Board for Settlement (hereinafter referred to as the “Interim Board”), vide notification No. 91 of 2021 dated 10.08.2021.
2. Meanwhile, in order to avoid genuine hardship to number of taxpayers who were in the advanced stages of filing their application for settlement before the ITSC as on 01.02.2021 and also due to the hardship faced during the covid pandemic by the tax payers, the Central Board of Direct Taxes (referred to as the “Board”) had provided relief vide Press Release dated 07.09.2021 thereby allowing assessees eligible to file application for settlement on 31.01.2021 to file such applications till the extended period of 30.09.2021.
3. In view of the above, the Board in exercise of its power under clause (b) of sub-section (2) of section 119 of the Income-tax Act, 1961 (the Act), in order to avoid genuine hardship to assessees authorizes the Commissioner of Income-tax, posted as Secretary to the Settlement Commission prior to 01.02.2021, to admit an application for settlement on behalf of the Interim Board filed after 31.01.2021, which is the date mentioned in sub-section (5) of section 245C of the Act for filing such application, and before 30.09.2021 and treat such applications as valid and process them as “pending applications” as defined in clause (eb) of section 245A of the Act.
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 the application for settlement.
5. The Hindi version of the order shall follow.
xxx xxx xxx”
4. In view of the circular, the issue raised in this petition needs no further adjudication. We may hasten to say that, at this stage, we have not considered the eligibility of the petitioners to make an application u/s 245C of the Act.
5. Taking into account that time period for making application before Interim Board was extended upto 30.09.2021 prior to which petitioners filed the application. The writ petitions are disposed of with direction to the Interim Board to consider the application made by the petitioners in accordance with law taking into consideration circular dated 28.09.2021.
6. It is clarified that in view of the circular issued, we need not dilate upon other issues raised in the writ petition.
