Case Law Details
RELEVANT PARAGRAPH
31. As a consequence of the amendments introduced by the 2007 Act, an application which abates for no fault of the applicant would, under section 245HA(2) revert back to the IT Authorities as if no application had, in the first place, been made under section 245C to the Settlement Commission. As inserted by the 2007 Act, Section 245HA(3) of the Act further provides that where an application so reverts to the IT Authorities upon abatement, the IT Authorities, including the assessing officer will be entitled to use all material and other information produced by the applicant before the Settlement Commission, including that disclosed in confidence based on the protection provided by law when the application was filed.
32. Section 245HA(3) thus has the effect of severely prejudicing the interest of applicants who in good faith that the case would be settled were induced to part with the confidential information based on the bona fide belief and a legitimate expectation, on the basis of the law in force when such applications were filed, that settlement orders would be passed and confidential information disclosed by such applicants would not be made available to the IT Authorities for use by them against such applicants in assessment proceedings, penalty and prosecution proceedings. After 1st June, 2007, the application has to be decided within twelve months. The consequences of the amendment has been that the number of new applications for settlement have dropped drastically as the applicants are aware when they make an application the consequences of an application not being disposed off within the time stipulated. As much as such an applicant cannot be visited with such great hardship, disadvantage and prejudice for no fault of its own but solely by reason of the inability of the Settlement Commission to dispose of such application by the specified date the provisions of section 245HA(1)(iv) read with Section 245HA(3) of the Act, so read would have to be held as arbitrary, unreasonable and violative of Article 14 of the Constitution.
33 The arbitrariness becomes more palpable when even in cases where the applicant has paid the additional tax and the interest thereon as required under the amended provisions of the Act and has fully co-operated with the Settlement Commission in ensuring expeditious disposal of its application, the availability of such confidential information to the IT Authorities is made dependent solely on a fortuitous circumstance, viz. the inability or failure on the part of the Settlement Commission to dispose of the application by the specified date, an event over which the applicant has no control. Thus, even two applicants who had filed their applications on the same date, equally fulfilled requirements of payment of tax and interest, and had equally cooperated with the Settlement Commission, could be classified differently on the aforesaid fortuitous circumstance. Thus, discrimination is inherent in the Impugned provision itself and the same is violative of Article 14 of the Constitution.
34. Arbitariness can also be seen in the context of consequences which the applicant has to suffer. As pointed out earlier on the application being declared as abated the confidential information which the petitioner had filed before the F.A. of 2007 and which was not available to the I.T. Authorities if the application was disposed of under Section 245(4) as it earlier stood would now be available. The answer by the Respondents to this submission is that the Legislature has advisedly amended the provisions of the Act and introduced Section 273AA. In our opinion Section 273AA as inserted only confers a power on the Commission for granting immunity from penalty. It does not prevent the authorities under the I.T. Act from using the confidential information which was filed including for prosecution and which was treated as confidential even if the petitioners application was not allowed to be proceeded with. What would be effect of Section 278AB introduced by the Finance Act 2008, will be considered separately.
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