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

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SCA/8128/2019HC GujaratGJHC24028606201907 May 2019Bench: HONOURABLE MS. JUSTICE HARSHA DEVANI,HONOURABLE MR. JUSTICE BHARGAV D. KARIA5 pages
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What did the High Court hold?

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 an order under section 245D(4) of the Income Tax Act, 1961. The reasoning was that during the period from 2.2.2018 until four weeks after 4.2.2019, the applications were not pending before the Settlement Commission, as they had been set aside by the High Court and were only restored to its file pursuant to the court's order. Therefore, this period could not be taken into consideration for computing the eighteen-month period mandated by section 245D(4A). The operative direction was that the petitions succeed and are allowed, with the exclusion of the specified period. The Settlement Commission was advised to decide the applications expeditiously. No issue was expressly left undecided.

What were the facts?

The petitioners, M/s Akshar Builders, filed applications before the Settlement Commission. The Settlement Commission initially passed orders on 2.2.2018 under section 245D(2C) of the Income Tax Act, 1961, holding these applications invalid. 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 from the stage of section 245D(2C) for decision in accordance with law. 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 but questioned its power to extend the statutory eighteen-month period for passing an order under section 245D(4A). The Settlement Commission noted that the time-barring dates were 31.05.2019 and 30.06.2019, unless extended by the High Court. Aggrieved by the Settlement Commission's order regarding its inability to extend the due date, the petitioners approached the High Court again.

What were the issues?

1. Whether the time taken by the petitioners in pursuing their remedy before the High Court, from 2.2.2018 until four weeks after 4.2.2019, 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 computation of the eighteen-month period. They relied on the fact that the High Court had restored the matters to the Settlement Commission's file. Revenue's contentions: The Settlement Commission, as recorded in the order, noted the CIT (DR)'s argument that the period of High Court proceedings should be considered "zero period" and the eighteen-month period should be reckoned from the application date after deducting this zero period. However, the Settlement Commission also noted the authorized representative's reservation about the Commission extending the time on its own and agreed that it might not be able to extend the due date.

Which sections of the Income-tax Act were involved?

Section 245D(2C),Section 245D(4A),Section 245D(4)

AI-generated summary — verify with the full judgment below

C/SCA/8122/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 8122 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8125 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8128 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8130 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8131 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8132 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8133 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8134 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8136 of 2019 With R/SPECIAL CIVIL APPLICATION NO. 8138 of 2019 =============================================================== M/S AKSHAR BUILDERS Versus THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) =============================================================== Appearance: MR J. P. SHAH, SENIOR ADVOCATE with MR MANISH J SHAH(1320) for the Petitioner MR. M. R. BHATT, SENIOR ADVOCATE with MRS MAUNA M BHATT(174) for the Respondents ================================================================ Page 1 of 5

C/SCA/8122/2019 ORDER CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR. JUSTICE BHARGAV D. KARIA

Date : 07/05/2019

ORAL ORDER (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. Rule Mrs. Mauna Bhatt, learned senior standing counsel waives service of notice of rule on behalf of the respondents in each of the petitions. 2. By these petitions under Article 226 of the Constitution of India, the petitioners have called in question the common order dated 1.4.2019 passed by the Settlement Commission holding that it does not have the power to extend the due date of passing order within eighteen months from the date of filing the applications . 3. Shorn of all unnecessary facts, the relevant facts are that by a judgment and order 4.2.2019 passed in Special Civil Application No. 13581 of 2018 and allied matters set aside the orders dated 2.2.2018 passed by the Settlement Commission under section 245D(2C) of the Income Tax Act, 1961 whereby it had held the applications filed by the respective petitioners to be invalid and restored the matters to the file of the Settlement Commission from the stage of section 245D(2C) of the Act to decide the same in accordance with law. Page 2 of 5

C/SCA/8122/2019 ORDER 4. Thereafter the Settlement Commission fixed the matter for hearing on 1.4.2019 and by an order dated 1.4.2019 held the application to be valid. The Settlement Commission recorded that the learned CIT (DR) had argued that the period during which the proceedings of the High Court of Gujarat were in progress and till the passing of the order, the period should be taken as “zero period” and the due date of eighteen months have to be reckoned from the date of filing of the application after reducing the zero period. It appears that the learned authorised representative expressed reservation extension of time barring date by the Commission on its own. The Settlement Commission agreed with the learned authorised representative that it may not be able to extend the due date of passing of order and held that the time barring date would remain the same as 31.05.2019 in case of petitioners shown at serial number 1 to 9 in the cause title and 30.06.2019 in case of the petitioner at serial number 10 unless the time is extended by the High Court. Being aggrieved, the petitioners have approached this court. 5. Heard Mr. J.P. Shah, Senior Advocate, learned counsel with Mr. Manish Shah, learned advocate for the petitioner and Mr. M R Bhatt, Senior Advocate, learned counsel with Mrs. Mauna Bhatt, learned Senior Standing Counsel for respondents. 6. The only issue that arises for consideration is whether the time taken by the petitioners in pursuing the remedy before this court would stand excluded while computing the period of 18 months prescribed under clause (iii) of section 245D(4A) of the Act. Page 3 of 5

C/SCA/8122/2019 ORDER 7. Section 245D(2A) of the Act to the extent the same is relevant for the present purpose reads thus: “(4-A) The Settlement Commission shall pass an order under sub-section (4)— (iii) in respect of an application made on or after the 1st day of June, 2010, within eighteen months from the end of the month in which the application was made.” 8. Thus, sub-section (4A) of section 245D of the Act mandates that the Settlement Commission passes an order under section 245D(4) of the Act within eighteen months from the end of the month in which the application was made which period would be over on 31st May, and 30th June respectively. In this case, the Settlement Commission passed orders under section 245D(2C) of the Act treating the applications made by the petitioners to be invalid. Against such orders, the petitioners approached this court by way of writ petitions, which came to be allowed by a judgment and order dated 4.2.2019 whereby the orders dated 2.2.2018 came to be set aside and the matters were restored to the file of the Settlement Commission. However, the operation of the judgment and order dated 4.2.2019 was stayed for a further period of four weeks so as to enable the respondent to approach the superior forum. Thus, for the period between 2.2.2018 till four weeks after 4.2.2019, there were no applications pending before the Settlement Commission and such applications were restored to the file of the Settlement Commission only pursuant to the order of this court. Therefore, the period between 2.2.2018 to four weeks after 4.2.2019 when the applications stood disposed of, cannot be taken into consideration for the purpose of computing the period of eighteen months as contemplated under section 245D(4A) of the Act. Page 4 of 5

C/SCA/8122/2019 ORDER 9. The petitions, therefore, succeed and are accordingly allowed. It is 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. Needless to state that the Settlement Commission should not wait for the entire period of eighteen months for passing the order under section 245D(4) of the Income Tax Act, 1961 to be over and may decide the application as expeditiously as possible. Rule is made absolute accordingly in each of the petitions with no order as to costs. (HARSHA DEVANI, J) (BHARGAV D. KARIA, J) B.U. PARMAR Page 5 of 5

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