Interim Board for Settlement & Ors. Vs Krushang Prakashbhai Soni (Supreme Court of India)
The Supreme Court considered a Special Leave Petition arising from a judgment of the Gujarat High Court concerning the eligibility of assessees to file applications for settlement under Chapter XIX-A of the Income-tax Act after the amendments introduced by the Finance Act, 2021. After condoning the delay and hearing senior counsel for the petitioners, the Supreme Court declined to interfere with the High Court’s decision and dismissed the Special Leave Petition, while expressly keeping the question of law, if any, open. Consequently, the High Court judgment continued to operate between the parties, and all pending applications stood disposed of, without a final pronouncement by the Supreme Court on the legal issues involved.
Read HC Judgment: Settlement applications held valid as Finance Act not in force before March 2021
The Gujarat High Court judgment addressed a batch of petitions challenging notices issued under Sections 148 and 153A of the Income-tax Act and orders passed by the Interim Board for Settlement under Section 245D(4), by which settlement applications were rejected as invalid. The Interim Board had held that the petitioners were not eligible to file settlement applications because they had not filed such applications on or before 31.01.2021, in view of the amendment to Section 245C by the Finance Act, 2021, which rendered the Income Tax Settlement Commission inoperative with effect from 01.02.2021.
The petitioners contended that they were entitled to file applications up to 31.03.2021, since the Finance Act, 2021 received Presidential assent only on 01.04.2021, and until that date, the Settlement Commission continued to exist in law. Reliance was placed on the CBDT Circular dated 28.09.2021 issued under Section 119(2)(b), which permitted applications filed after 31.01.2021 and before 30.09.2021 to be treated as “pending applications,” subject to conditions. The petitioners argued that the respondents misconstrued the circular and the statutory provisions by insisting on eligibility strictly as on 31.01.2021. Referring to Sections 245A(b) and 245C(1), it was submitted that a “case” exists when assessment proceedings are pending or deemed to have commenced, including where notices under Section 148 were issued or could have been issued, and that an assessee may apply for settlement at any stage of such a case.
The respondents relied on earlier judicial decisions dealing with retrospective amendments and withdrawal of statutory benefits to argue that once the Settlement Commission ceased to exist 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’ position, was under challenge before the Supreme Court.
The Gujarat High Court held that the issue of eligibility was no longer res integra in view of the decisions of the Madras High Court and the Bombay High Court. It was observed that Section 245C confers a statutory right to approach the Settlement Commission, and Section 245A(b) defines a “case” as proceedings pending before the Assessing Officer, commencing from the issuance of a notice initiating assessment or reassessment. The Court noted that until the Finance Bill, 2021 became law on 01.04.2021, it had no statutory force, and applications filed before that date could not be invalidated solely on the basis of a retrospective amendment.
Adopting the reasoning of the Madras High Court, the Gujarat High 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 or by necessary implication. During the interregnum period from 01.02.2021 to 31.03.2021, the Settlement Commission continued to exist in law, and eligible assessees with a “case” pending under Section 245A(b) had a vested right to apply for settlement. The retrospective cut-off date of 01.02.2021 in Section 245C(5) and paragraph 4(i) of the CBDT circular was therefore read down to 31.03.2021.
Accordingly, the High Court set aside the impugned orders of the Interim Board rejecting the applications as invalid, directed that applications filed between 01.02.2021 and 31.03.2021 be treated as pending applications, quashed consequential actions taken by the Assessing Officer, and remanded the matters to the Interim Board for consideration on merits. The Supreme Court’s dismissal of the Special Leave Petition left this relief undisturbed, while keeping the broader legal questions open for future consideration.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
