The change in the Finance Law cannot retroactively affect the taxpayer’s vested right to decide on the settlement application. U/S 245(D): Calcutta HC

The division bench of Justice Harish Tandon And Justice Hiranmay Bhattacharyya reiterated that retroactive legislation cannot affect acquired rights.

The purpose of Section 245(C)(5) is not to invalidate an application already filed after February 1, 2021, but should be read to mean that after February 1, 2021, upon approval of the No application can be made to the President of India has been received and any application made before the Assessor grants consent will not be covered by Section 245(C)(5) of the Act, the court further reiterated.

The bench reiterated this while citing the Bombay High Court’s decision in the case Sar Senapati Santaji Ghorpade Sugar Factory Ltd. vs. Assistant Commissioner of Income-Tax ((2024) 161 taxmann.com 166 (Bombay).

Facts:

The appellant/administrator filed applications with the Settlement Commission for settlement of his income tax affairs under Section 245C(I) of the Income Tax Act. In the meantime, the appellants were searched and seized and notices were issued u/s 153(A). The SETCOM considered the application invalid and refused to proceed under U/S 245(D)1 on the ground that the necessary conditions for filing a settlement application U/S 245(C) with the press release dated September 07 2021 and the order of CBDT u /s 119(2)(b) were not complied with.

When the applicant approached the Supreme Court, the single judge ruled that the panel’s order was constitutionally valid and non-discriminatory.

Therefore, the appellants sought a declaration that the amendment introduced by the Finance Act, 2021, abolishing the Income Tax Conciliation Commission and setting up an interim committee to deal with the pending applications, was ultra vires, arbitrary, unconstitutional and violative of the provisions of the Income Tax Act and Articles 14 of the Constitution of India.

Supreme Court Comments:

The Chamber noted that before the Finance Law of 2021 came into force, eligible taxpayers had the right to approach SETCOM at any stage of a case affecting them.

However, the court noted that SETCOM was abolished by the Finance Act 2021 notified on April 1, 2021 and an interim committee has been constituted to deal with the pending applications.

A proviso has been inserted to section 245B which states that SETCOM shall cease to operate on or after 1 February 2021 and section 245C(1) has been inserted by the Finance Act 2021 which provides that on or no application may be made under this section after February 1, 2021, the bank was added.

However, the court observed that the Finance Act was brought into force retrospectively with effect from February 1, 2021, which was challenged by the assessee’s counsel on the ground that the Finance Act, 2021 was notified only on April 1, 2021 and therefore the statutory The legal remedy to turn to SETCOM could not have been withdrawn retrospectively.

In summary, Mr. JP KhaitanRepresenting the complainant, he argued that this acquired right could not be affected by retroactive legislation.

The Bank noted that the question of whether paragraph 4(i) of the Circular of September 28, 2021 is unlawful in that, in addition to the question of whether financing is provided, it imposes a condition of the obligation to submit a settlement application under the Law of 2021 is unconstitutional in the sense that it fell by way of retrospective application for consideration before the Division Bench of the Madras High Court in the case Jain Metal Rolling Mills vs. Union of India ((2024) 461 ITR 423 (Mad)).

The question as to the validity of the Circular was answered in the Jain Metal case by holding that if SETCOM itself has been repealed with effect from February 1, 2021, it cannot be said that Clause 4(i) of the Circular is in conflict or an additional provision provides a condition to the statutes, the bench added.

Therefore, the Bench, referring to the decision of the Madras High Court, observed that all petitions relating to the appellants, including cases arising between February 1, 2021 and March 31, 2021, shall be deemed to be pending petitions The purpose of the audit will be considered by the interim board.

If such applications are rejected on the ground that no case was pending as on January 31, 2021, such orders shall be set aside and the applications shall be deemed to be pending consideration by the Interim Committee unless otherwise specified, the bench added.

In the present case, the appellants filed an application with the Settlement Commission before the Finance Act 2021 came into force.

The Supreme Court, therefore, allowed the respondent’s appeal and directed the Interim Committee to consider the settlement application in accordance with the scheme that the Central Government may prepare for cases arising before January 31, 2021.

Counsel for the Appellant/Assessee: Senior Adv JP Khaitan along with Advocates Saumya Kejriwal, Ananya Rath, Debarghya Banerjee and Navin Mittal

Counsel for the Respondent/Tax Advisor: Senior Adv Vipul Kundalia and Advocate Soumen Bhattacharjee

Case Title: Pradeep Kumar Naredi vs. Union of India

Case number: MAT 375 of 2002

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