Megha Engineering And Infrastructure Ltd. Vs Income Tax Settlement Commission & Ors. (Delhi High Court)
ITSC Applications Filed Before 31 March 2021 to Be Treated as Pending- Retrospective Abolition of ITSC from 01 Feb 2021 Held Arbitrary- Delhi HC Reads Down 01.02.2021 Cut-Off – Settlement Applications Filed Till 31.03.2021 Valid
Key Issue:
Whether applications filed before the Income Tax Settlement Commission (ITSC) after 01.02.2021 but before 31.03.2021 are valid & should be treated as pending applications u/s 245A(eb) after the enactment of Finance Act, 2021 which abolished the ITSC retrospectively from 01.02.2021.
Facts:
- Searches under Section 132 were conducted on Megha Engineering & Infrastructure Ltd. & Western UP Power Transmission Co. Ltd. in October 2019.
- Notices under Sections 153A/153C & 143(2) were issued in March 2021.
- Both petitioners filed applications before the ITSC on 22.03.2021, supported by payment of taxes & interest.
- By interim orders dated 17.03.2021 & 25.03.2021, Delhi High Court directed the ITSC to accept & process their applications since the Finance Bill, 2021 had not yet become law.
- Post enactment of Finance Act, 2021 (effective 01.04.2021), Revenue refused to treat those applications as valid citing retrospective abolition of ITSC from 01.02.2021.
Petitioners’ Contentions:
- The retrospective cut-off date (01.02.2021) in Section 245C(5) is unconstitutional & arbitrary.
- They had a vested right to approach the ITSC till 31.03.2021 as the Finance Act, 2021 came into force only on 01.04.2021.
- The retrospective operation took away a valuable statutory right without justification.
- Relied upon several High Court rulings-
- Jain Metal Rolling Mills v. UOI (Madras HC)
- Sar Senapati Santaji Ghorpade Sugar Factory v. ACIT (Bombay HC)
- Vetrivel Infrastructure v. DCIT (Gujarat HC)
- Pradeep Kumar Naredi v. UOI (Calcutta HC)-all of which held that applications filed till 31.03.2021 were valid & must be treated as pending applications before the Interim Board.
- Pointed to CBDT’s Press Release (07.09.2021) & Order (28.09.2021) which acknowledged that assessees eligible on 31.01.2021 with pending assessments could file applications up to 30.09.2021.
- Invoked Article 14 (arbitrariness), Article 20(3) (self-incrimination risk if disclosures used against them), & the maxim actus curiae neminem gravabit (no one should suffer by an act of court).
Revenue’s Contentions:
- ITSC is a statutory body; Parliament can abolish it & fix any cut-off date as a matter of legislative policy.
- No vested right exists to seek settlement; the Commission could always reject an application under Section 245D(1).
- The 01.02.2021 cut-off reflects legislative choice & is not arbitrary.
- Relied on R.K. Garg v. Union of India (economic legislation presumed valid) & VKC Footsteps (SC: courts should defer to fiscal policy choices).
- High Court rulings cited by petitioners were not binding; SLPs were dismissed leaving question of law open.
Delhi High Court’s Findings:
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