M/S MEHTA STONE POLISHERS AND ANR vs. ASST COMMISSIONER OF INCOME TAX

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CW/2570/2017HC RajasthanRJHC02062345201719 March 2025Author: AVNEESH JHINGAN,MANEESH SHARMA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Settlement Commission's approach in dismissing the application was flawed. It noted that no communication was sent to the applicants requesting reconstruction of the record or supplying copies of the application and relied documents. The attempt to reconstruct the file was made by the department without involving the petitioners, leaving them without a remedy and without fault on their part. The Court found that the mode adopted by the Commission was improper and contrary to its own earlier directions. Therefore, the impugned order of the Settlement Commission was set aside, and the matter was remitted back to the Commission for a fresh decision on the application. The applicants were directed to appear before the concerned authority on April 21, 2025. The ratio decidendi is that a Settlement Commission cannot dismiss an application for non-cooperation in reconstructing records without affording the applicant a proper opportunity and clear communication, especially when prior court orders mandate a decision on merits after assessing the cause of delay.

What were the facts?

The petitioners, M/s Mehta Stone Polishers and its partner, filed a writ petition challenging the validity of Section 245HA of the Income Tax Act, 1961, which provided for the automatic abatement of applications before the Settlement Commission if no final order was passed by March 31, 2008. The earlier writ petition was disposed of on April 25, 2016, remitting the matter to the Settlement Commission to consider whether any delay in proceedings was attributable to the applicant. If not, the Commission was to proceed with the application as if it had not abated. Subsequently, the Settlement Commission dismissed the application on December 15, 2016, citing the unavailability of records and the petitioners' alleged lack of interest in reconstructing the file.

What were the issues?

1. Whether the Settlement Commission erred in dismissing the application for settlement when the delay in proceedings was not attributable to the applicants, contrary to the directions of this Court? Assessee's Contention: The petitioners argued that the Settlement Commission dismissed their application without proper communication or opportunity to reconstruct the record. They contended that the Commission's attempt to reconstruct the file solely through departmental communication, without involving the applicants, left them remediless despite the Court's earlier directions to decide the application. They relied on the High Court's previous order which directed the Commission to proceed if the delay was not attributable to the applicant. Revenue's Contention: The judgment does not record any specific contentions made by the revenue in this writ petition. However, the Settlement Commission's order, which is under challenge, dismissed the application holding that the applicants were not interested in pursuing their matters and the Commission was unable to determine the cause of delay.

Which sections of the Income-tax Act were involved?

Section 245HA,Section 245C

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
[2025:RJ-JP:12383-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 2570/2017 1. M/s Mehta Stone Polishers, Through Its Partner Shri Rajendra Kumar Mehta S/o Shri Abhay Kumar Jain, M/s Chunni Lal Motilal Sarraf, Main Market, Jhalrapatan, Dist. Jhalawar 2. Rajendra Kumar Mehta S/o Shri Abhay Kumar Jain, M/s Chunni Lal Motilal Sarraf, Main Market, Jhalrapatan, Dist. Jhalawar ----Petitioners Versus Asst. Commissioner Of Income Tax, Central Circle, Kota Rajasthan ----Respondent For Petitioner(s) : Mr.Rajat Sharma & Mr.Akshay Sharma for Mr.Sanjay Jhanwar, Sr. Adv. For Respondent(s) : Mr.Siddharth Bapna with Mr.Meyhul Miittal HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE MANEESH SHARMA

Order 19/03/2025 AVNEESH JHINGAN, J (ORAL):-

1.

This petition is filed challenging the order dated 15.12.2016 passed by the Income Tax Settlement Commission (for brevity ‘the Commission’) dismissing the application filed by the petitioners.

2.

The brief facts are that the petitioners initially filed a writ petition D.B. W.P. (Civil) No.13135/2008 titled as M/s Mehta Stone Polishers & Ors. Vs. Union of India & Ors. challenging the validity of the provisions of Section 245HA of the Income Tax Act, 1961 (for short ‘the Act’) as inserted by the Finance Act, 2007. The amended provision provides for automatic abatement of

[2025:RJ-JP:12383-DB] (2 of 5) [CW-2570/2017] the application filed before the Settlement Commission in case no final order is passed before 31.03.2008. The writ petition was disposed of on 25.04.2016. The operative part of the order is quoted below:- “Counsel for the petitioners submits that the issue involved in these writ petitions has been dealt with by the Apex Court in the case of Union of India Vs. Star Television News Ltd.: (2015) 12 SCC 665. quoted here under:- “59. From the above discussion having arrived at a conclusion that fixing the cut off date as March 31, 2008, was arbitrary the provisions of Section 245HA(1)(iv) to that extent will be also

[2025:RJ-JP:12383-DB] (3 of 5) [CW-2570/2017] arbitrary. We have also held that it is possible to read down the provisions of Section 245HA(1)(iv) in the manner set out earlier. This recourse has been taken in order to avoid holding the provisions as unconstitutional. Having so read, we would have to read Section 245HA(1)(iv) to mean that in the event the application could not be disposed of for any reasons attributable on the part of the applicant who has made an application under Section 245C. Consequently, only such proceedings would abate under Section 245HA(1) (iv).Considering the above, the Settlement Commission to consider whether the proceedings had been delayed on account of any reasons attributable on the part of the Applicant. If it comes to the conclusion that it was not so, then to proceed with the application as if not abated. Respondent No. 1 if desirous of early disposal of the pending applications, to consider the appointment of more Benches of the Settlement Commission, more so at the Benches where there is

[2025:RJ-JP:12383-DB] (4 of 5) [CW-2570/2017] heavy pendency like Delhi and Mumbai.” In view of the direction, quoted above, these writ petitions are to be governed by the judgment in the case (supra). The Settlement Commission would consider the issue of delay and if not attributable to the applicant, it would complete the proceedings within a period of six months from the date of receipt of copy of this order. With the aforesaid, the writ petitions stand disposed of.”

3.

In pursuance to the directions of this Court, the matter was taken up by the settlement commission and it was recorded that earlier the jurisdiction was with the Principal Bench, New Delhi which was later changed but no record was transferred. In an inter-se communication between two benches of the commission, it was informed that the record is not available and the files be reconstructed. On failure of the applicants to reconstruct the file, the application was dismissed holding that the applicants were not interested in pursuing their matters and the commission is unable to decide as to whether delay is attributable to applicants or not.

4.

Heard learned counsel for the parties and perused the pleadings.

5.

From the order of the commission, it is evident that no communication was sent to the applicants for reconstruction of the record or supplying copies of the application along-with the

[2025:RJ-JP:12383-DB] (5 of 5) [CW-2570/2017] documents relied upon, only an attempt was was made by the department to reconstruct the file without involving the applicants.

6.

The mode adopted by the commission, the petitioner has been left remediless, without any fault and inspite of directions of this Court to the commission to decide the application.

7.

The impugned order is set aside and the matter is remitted back to the commission to decide the application. The writ petition is allowed.

8.

The applicants are directed to appear before the Authority concerned on 21.04.2025. (MANEESH SHARMA),J (AVNEESH JHINGAN),J Monika/58 Whether Reportable: No

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