Vetrivel Infrastructure Vs DCIT (Gujarat High Court)
The Gujarat High Court considered a batch of petitions challenging notices issued under Sections 148/153A of the Income-tax Act, 1961, and orders passed by the Interim Board of Settlement under Section 245D(4), by which settlement applications were rejected as invalid on the ground that the petitioners were not eligible to apply for settlement as on 31.01.2021. The Interim Board had held that, following the amendment to Section 245C by the Finance Act, 2021 with effect from 01.02.2021, applications for settlement could not be entertained unless the assessee was eligible as on 31.01.2021, particularly where notices under Sections 148 or 153A were issued after that date.
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The petitioners contended that they were entitled to file settlement applications up to 31.03.2021, since the Finance Act, 2021 received Presidential assent only on 01.04.2021 and, until then, the Settlement Commission continued to operate. Reliance was placed on CBDT Circular dated 28.09.2021 issued under Section 119(2)(b), which permitted admission of applications filed after 31.01.2021 and before 30.09.2021 as “pending applications,” subject to conditions. It was argued that the respondents misread the circular and the statutory provisions by insisting on eligibility strictly as on 31.01.2021. Referring to Sections 245A(b) and 245C(1), the petitioners submitted that a “case” exists when assessment proceedings are pending or deemed to have commenced, including situations where notices under Section 148 were issued or could have been issued, and that an application could be made at any stage of such a case.
The respondents opposed the petitions by relying on earlier decisions, including those dealing with retrospective amendments and withdrawal of statutory benefits, and argued that once the Settlement Commission was rendered inoperative from 01.02.2021, no eligibility could arise thereafter. They also pointed out that the decision of the Madras High Court in Jain Metal Rolling Mills, which supported the petitioners’ stand, was under challenge before the Supreme Court.
The Court held that the issue was no longer res integra in view of the decisions of the Madras High Court and the Bombay High Court, which had examined the same statutory framework and circular. It was noted that Section 245C confers a statutory right on an assessee to approach the Settlement Commission, and that Section 245A(b) defines a “case” as proceedings pending before the Assessing Officer, commencing from the issuance of notice initiating assessment or reassessment. The Court observed that the Finance Bill, 2021, until enacted and notified as law on 01.04.2021, did not have statutory force, and therefore applications filed before that date could not be invalidated merely on the basis of a retrospective amendment.
The Court rejected the respondents’ reliance on earlier judgments such as those concerning deductions or procedural defects, holding that those cases did not deal with the crystallisation of vested rights in the context of retrospective abolition of a statutory forum. Adopting the reasoning of the Madras High Court, the Court held that although Parliament was competent to abolish the Settlement Commission and enact retrospective amendments, such retrospectivity could not extinguish vested rights unless expressly provided or necessarily implied. During the interregnum period from 01.02.2021 to 31.03.2021, the Settlement Commission continued to exist in law, and eligible assessees with pending or deemed pending “cases” had a vested right to apply for settlement.
The Court further held that the purpose of the Finance Act, 2021 was to abolish the Settlement Commission and transfer pending applications to the Interim Board, not to nullify applications filed in respect of cases arising during the interregnum period. Consequently, the cut-off date of 01.02.2021 in Section 245C(5) and paragraph 4(i) of the CBDT circular was read down to 31.03.2021. Applications filed between 01.02.2021 and 31.03.2021 were directed to be treated as pending applications for consideration by the Interim Board.
Accordingly, the impugned orders of the Interim Board rejecting the applications as invalid were set aside. All consequential actions taken by the Assessing Officer were quashed, and the matters were remanded to the Interim Board for consideration of the settlement applications on merits, in accordance with law and the scheme framed by the Central Government. The petitions were allowed, with no order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
