The Calcutta High Court has held that retrospective legislation cannot affect vested rights taxpayers.
The bench of Justice Harish Tandon and Justice Hiranmay Bhattacharyya has observed that the purport of subsection 5 of Section 245(C) of the Income Tax Act is not to make an application already filed after 01.02.2021 as invalid but it should be read as no application shall be made after 01.02.2021 once the assent of the President of India has been received. Any application made by the assessee before the grant of assent will not be hit by Subsection 5 of Section 245(C) of the Income Tax Act.
Prior to the Finance Act, 2021, the eligible assessees were entitled to approach the Income Tax Settlement Commission at any stage of a case relating to them. The Settlement Commission was abolished by the Finance Act, 2021 which was notified on 01.04.2021 and an Interim Board was constituted to deal with the pending applications.
Proviso to section 245B was inserted which states that the Settlement Commission shall cease to operate on or after 01.02.2021. Section 245C(1) was inserted by the Finance Act, 2021 which states that no application shall be made under that Section on or after 01.02.2021. The Finance Act was made retrospective in operation with effect from 01.02.2021.
A circular was issued on 28.09.2021 extending the time limit for filing applications before the Interim Board upto 30.09.2021. The circular provided that the relaxation shall be available to the application filed by the assessees who were eligible to file application for settlement on 31.01.2021 for the assessment years for which the application is sought to be filed and where the relevant assessment proceedings of the assessee are pending as on the date of filing of the application for settlement.
The appellants/assessee sought the declaration that the amendment introduced by the Finance Act, 2021 by which the Income Tax Settlement Commission was abolished and an interim Board was constituted to deal with the pending applications to be ultra vires, arbitrary, unconstitutional and violative of the provisions of the Act and Article 14 of the Constitution of India.
The petitioners challenged the CBDT order dated 28.09.2021 being ultra vires, arbitrary, unconstitutional and violative of the provisions of the Act and Article 14 of the Constitution of India and for quashing the order of the Settlement Commission dated 14.01.2022.
The court while allowing the appeal restored the application of the petitioner dated 17.03.2021 filed before the Income Tax Settlement Commission. The Interim Board is directed to consider the said application in accordance with the scheme that may be framed by the Central Government as in respect of the cases which arose prior to 31.01.2021 and to decide the same in accordance with law and on merits.
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Case Details
Case Title: Shri Pradeep Kumar Naredi Versus Union of India & Ors.
Case No.: MAT 375 of 2022 with I.A. No. CAN 1 of 2022
Date: 24.12.2024
Counsel For Appellant: Senior Advocate J.P. Khaitan
Counsel For Respondent: Senior Advocate Vipul Kundalia
