BABUBHAI RAMCHANDDAS PATEL vs. INCOME TAX SETTLEMENT COMMISSION

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SCA/14826/2012HC GujaratGJHC24019019201212 November 2014Bench: HONOURABLE MR. JUSTICE KS JHAVERI,HONOURABLE MR. JUSTICE K.J.THAKER4 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court held that the view adopted by the Settlement Commission was erroneous and deserved to be quashed and set aside. The ITSC had relied on the Supreme Court's decision in CIT v. Suresh Gupta, 297 ITR 322. However, this decision was subsequently disapproved by a Larger Bench of the Supreme Court in Commissioner of Income-tax (Central)-1, New Delhi v. Vatika Township (P) Ltd., [2014] 49 taxmann.com 249 (SC). The Vatika Township case observed that the insertion of a proviso in Section 113 of the Act was prospective, not declaratory, statutory, or curative. Therefore, the ITSC's reasoning was flawed. The impugned order was quashed and set aside, and the matter was remitted to the Settlement Commissioner for fresh adjudication in light of the Supreme Court's decision in Vatika Township, after affording both parties an opportunity of hearing.

What were the facts?

The petitioner, Babubhai Ramchanddas Patel, filed settlement applications before the Income Tax Settlement Commission (ITSC) for the block period AY 1990-91 to AY 1999-00 and for the period 01.04.1999 to 12.08.1999 (AY 2000-01). The ITSC admitted the application on 10.10.2002. Subsequently, the ITSC informed the petitioner about an unpaid interest of Rs. 87,020, which was paid by the petitioner on 25.07.2012. Following a hearing on 26.07.2012, the ITSC, by an order dated 30.07.2012, declined to proceed with the settlement applications under Section 245D(2D) of the Income Tax Act. The petitioner filed these Special Civil Applications challenging the ITSC's order.

What were the issues?

1. Whether the Income Tax Settlement Commission erred in declining to proceed with the settlement applications under Section 245D(2D) of the Income Tax Act, 1961, based on its interpretation of the law. Assessee's Contention: The assessee implicitly argues that the ITSC's decision was erroneous. The judgment indicates the assessee is aggrieved by the ITSC's order. The assessee's counsel appeared and was heard. Revenue's Contention: The judgment does not explicitly record the revenue's contentions. However, the ITSC, as a respondent, passed the order under challenge. The revenue's counsel appeared and was heard.

Which sections of the Income-tax Act were involved?

Section 245D(2D),Section 113

AI-generated summary — verify with the full judgment below

C/SCA/14826/2012 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 14826 of 2012 With SPECIAL CIVIL APPLICATION NO. 14827 of 2012 TO SPECIAL CIVIL APPLICATION NO. 14828 of 2012

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI

and HONOURABLE MR.JUSTICE K.J.THAKER

================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ BABUBHAI RAMCHANDDAS PATEL....Petitioner(s) Versus INCOME TAX SETTLEMENT COMMISSION & 2....Respondent(s) ================================================================ Appearance: MR TEJ SHAH, ADVOCATE for the Petitioner(s) No. 1 MR SUDHIR M MEHTA, ADVOCATE for the Respondent(s) No. 2 Page 1 of 4

C/SCA/14826/2012 JUDGMENT ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER

Date : 12/11/2014

ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. All these matters involve common questions on law and facts and hence, they are decided by this common judgment. 2. These petitions have been filed against the order passed by the Income Tax Settlement Commission whereby, the Commission declined to proceed with the settlement applications filed by the petitioner as per the provision of Section 245D(2D) of the Income Tax Act. 3. Briefly   stated,   the   facts   are   that   the   petitioner   filed   a Settlement Application for the Block period of A.Y. 1990­91 to A.Y. 1999­00 and for the further period of 01.04.1999 to 12.08.1999 pertaining to A.Y. 2000­01 before respondent no.1 The respondent no.1   admitted   the   Settlement   Application   vide   order   dated 10.10.2002. 4. Respondent no.1 informed the petitioner that the interest to the tune of Rs.87,020/­ has not been paid. The petitioner paid the said sum on 25.07.2012 before the Settlement Commissioner. On 26.07.2012 the hearing was conducted. Thereafter, on 30.07.2012, Page 2 of 4

C/SCA/14826/2012 JUDGMENT respondent no.1 passed the order holding that the application for settlement cannot be proceeded with as per Section 245D(2D) of the Act. Being aggrieved by the said order, the present petitions have been preferred. 5. We   have   heard   learned   counsel   for   both   the   sides.   The Settlement Commission has passed the impugned order by placing reliance upon a decision of the Apex Court in the case of CIT v. Suresh Gupta, 297 ITR 322. 6. However, subsequently, the said decision of the Apex Court has been dis­approved by the Larger Bench of the Apex Court in the case   of   Commissioner   of   Income­tax   (Central)­1,   New   Delhi   v. Vatika   Township   (P)   Ltd.,   [2014]   49   taxmann.com   249   (SC) wherein, in para­38, it has been observed as under; “38. When we examine the insertion of proviso in Section 113 of the Act, keeping in view the aforesaid principles, our irresistible conclusion is that the intention of the legislature was to make it prospective in nature. This proviso cannot be treated as declaratory / statutory or curative in nature...” 7. In view of the above, the view adopted by the Settlement Commissioner is erroneous and deserves to be quashed and set aside. Accordingly, the impugned order passed by the Settlement Commissioner is quashed and set aside and the matter is remitted to the Settlement Commissioner for adjudication afresh in light of the aforesaid  decision  of the Apex  Court.  Needless  to  say that Page 3 of 4

C/SCA/14826/2012 JUDGMENT adjudication shall be done after giving due opportunity of hearing to both the sides. 8. With   the   above   observations,   the   petitions   stand   partly allowed. Rule is made absolute to the above extent with no order as to costs. (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/* Page 4 of 4

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