M/S AKSHAR DEVELOPERS vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL)

Facts

The petitioners, M/s Akshar Builders, filed applications before the Settlement Commission. The Settlement Commission initially passed orders on 2.2.2018 declaring these applications invalid under section 245D(2C) of the Income Tax Act, 1961. The petitioners challenged these orders before the Gujarat High Court, which, by a judgment and order dated 4.2.2019, set aside the Settlement Commission's orders and restored the matters to the Settlement Commission's file. The operation of this High Court order was stayed for four weeks. Subsequently, on 1.4.2019, the Settlement Commission held the applications to be valid. However, it also held that it did not have the power to extend the due date for passing the final order beyond the statutory eighteen months, leading to the present petitions.

Held

The High Court held that the period from 2.2.2018 to four weeks after 4.2.2019 shall stand excluded while computing the period of eighteen months for passing the order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during this period, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored pursuant to the court's order. Therefore, this period could not be taken into consideration for the statutory eighteen-month computation. The Settlement Commission was directed to decide the applications expeditiously and not wait for the entire eighteen-month period to expire. The ratio is that periods where proceedings are stayed or applications are not pending before the Settlement Commission due to judicial intervention should be excluded from the statutory time limit for passing orders.

Key Issues

1. Whether the time taken by the petitioners in pursuing their remedy before the High Court of Gujarat would stand excluded while computing the period of eighteen months prescribed under section 245D(4A)(iii) of the Income Tax Act, 1961 for the Settlement Commission to pass an order? Assessee's Contentions: The petitioners argued that the period during which their applications were not pending before the Settlement Commission due to the High Court proceedings should be excluded from the eighteen-month computation period. They relied on the principle that time spent in pursuing a remedy before a higher forum, which ultimately leads to the restoration of the case, should not count against the assessee. Revenue's Contentions: The Revenue contended that the Settlement Commission did not have the power to extend the due date of passing the order on its own. The Settlement Commission, while acknowledging the Revenue's argument regarding the "zero period" during High Court proceedings, ultimately agreed with the assessee's representative that it might not be able to extend the due date.