GURMEET SINGH Vs. DEPUTY COMMISSIONER OF INCOME TAX
LAWS(IT)-2014-7-41
INCOME TAX APPELLATE TRIBUNAL
Decided on July 30,2014

GURMEET SINGH Appellant
VERSUS
DEPUTY COMMISSIONER OF INCOME TAX Respondents

JUDGEMENT

B.P.Jain, Member (A) - (1.) THIS appeal of the assessee arises from the order of the CIT(A) -1, Ludhiana, dt. 1st July, 2011 for the block period 1st April, 1990 to 29th Nov., 2000. The assessee has raised following grounds of appeal: "1. That the order passed under s. 250(6) of the I.T. Act, 1961 by the learned CIT(A) -1, Ludhiana is against law and facts on the file inasmuch as the learned CIT(A) was not justified to arbitrarily hold that the assessment completed by the learned AO was not barred by time.
(2.) THAT the learned CIT(A) further gravely erred in upholding the validity of assessment framed under s. 158BC r/w s. 158BD. That he was not justified to hold that the insufficiency with regard to the issuance of notice under s. 158BD could be overcome by provisions of s. 292BB.
(3.) THAT he was not justified to uphold the completion of block assessment and determination of undisclosed income for various years at Rs. 27,73,230." The learned counsel for the assessee, Mr. Ashwani Kumar, chartered accountant argued at the outset to decide ground No. 1 with regard to the assessment being time -barred and accordingly, he proceeded to argue the issue with regard to ground No. 1. The learned counsel for the assessee, Mr. Ashwani Kumar argued that the brief facts of the case are that the assessee is the proprietor of the petrol pump and there was no search and seizure operations on the applicant but the search was made on the premises of Shri Raj Kumar accountant and as per para. 14 of the order, some documents pertaining to the assessee were seized and on the basis of that the proceedings under s. 158BD were initiated against the assessee. As per para. 3 of the order, the assessee filed an application before the Settlement Commission on 7th June, 2002 for the block period and for regular assessment for asst. yr. 2001 -02 and the Settlement Commission passed the order under s. 245D(1) and that application was allowed to be proceeded with and thereafter, since the assessee did not pay the admitted tax, the proceedings in this case abated on 31st July, 2007. He further stated that there has been amendment by the Finance Act, 2007 w.e.f. 1st June. 2007 wherein new provision i.e., sub -s. (2D) was inserted which is being reproduced as under: "Where an application was made under sub -s. (1) of s. 245C before the 1st June, 2007 and an order under the provisions of sub -s. (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st June, 2007, but an order under the provisions of sub -s. (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st July, 2007." He further stated that along with it, an Explanation had also been inserted therein which reads as under: "Explanation: In respect of the applications referred to in this subsection, the 31st day of July, 2007 shall be deemed to be the date of the order of rejection or allowing the application to be proceeded with under sub -s. (1)." He further stated that s. 245HA was also inserted w.e.f. 1st June, 2007 which is also reproduced as under: "245HA. Abatement of proceeding before Settlement Commission. - -(1) where - - (i) an application made under s. 245C on or after the 1st day of June, 2007 has been rejected under sub -s. (1) of s. 245D; or (ii) an application made under s. 245C has not been allowed to be proceeded with under sub -s. (2A) or further proceeded with under sub -s. (2D) of s. 245D; or (iii) an application made under s. 245C has been declared as invalid under sub -s. (2C) of s. 245D; or (iv) in respect of any other application made under s. 245C, an order under sub -s. (4) of s. 245D has not been passed within the time or period specified under sub -s. (4A) of s. 245D, the proceedings before the Settlement Commission shall abate on the specified date." 1.1 The learned counsel further stated that there are four conditions on the basis of which, the application stood abated and for each one of the cases, the specified date had been laid down in the Explanation to s. 245HA which reads as under: "Explanation: For the purposes of this sub -section, 'specified date' means - - (a) in respect of an application referred to in cl. (i), the day on which the application was rejected; (b) in respect of an application referred to in cl. (ii) the 31st day of July, 2007; (c) in respect of an application referred to in cl. (iii), the last day of the month in which the application was declared invalid; (d) in respect of an application referred to in cl. (iv), on the date on which the time or period specified in sub -s. (4A) of s. 245D expires." 1.2 He further stated the above two sections are required to be examined vis   -vis the grounds as taken by the assessee that assessment as framed by the AO is barred by time. The amended s. 245D(2D) made it obligatory for the applicant to pay the additional tax on the income disclosed in the settlement application on or before 31st July, 2007, so that the application could be proceeded further for final adjudication. However, at the time when the payment of tax was to be made, due to change of policies of liquor, the business of the group had to be closed abruptly and, as such, full payment of tax along with interest could not be made. Therefore, due to the non -payment of taxes, the application of the assessee stood abated on 31st day of July, 2007, which is clear from s. 245D(2D) r/w cl. (ii) of s. 245HA and Expln. (b) to s. 245HA where the 'specified date' has been defined. The above section makes the things absolutely clear that in case, where the complete payment of tax and interest on the amount disclosed before the Settlement Commission has not been made, then the application of the assessee stood abated on 31st July, 2007 and no further order was required to be passed by the Settlement Commission and the use of word "shall" and defining of 'specified date' for the purposes of adjudication makes the thing absolutely clear and leaves no ambiguity. These are statutory provisions and there cannot be any extension of the date in view of the statutory provisions which have been laid down in the Act. The provisions of the statute are very clear and there is no ambiguity about the same and the use of word 'shall' in 245D(2D) r/w Explanation to s. 245D(2A), which lays down that w.e.f. 31st July, 2007, it shall be deemed the date of order of rejection or allowing the application to be proceeded with and also Explanation to s. 245HA, where the 'specified date' has been defined with reference to each eventuality leave, no room for doubt at all that the present assessment as framed is barred by time and deserves to be quashed. Clauses (2), (3) and (4) of Explanation to s. 245HA lay down the procedure for completion of assessment within the stipulated time and cl. (4) of Explanation to s. 245HA reads as under: "(4) For the purposes of the time -limit under ss. 149, 153, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under s. 243 or 244 or, as the case may be, s. 244A, for making the assessment or reassessment under sub -s. (2), the period commencing on and from the date of the application to the Settlement Commission under s. 245C and ending with 'specified date" referred to in sub -s. (1) shall be excluded; and where the assessee is a firm, for the purposes of the time -limit for cancellation of registration of the firm under sub -s. (1) of s. 186, the period aforesaid shall, likewise, be excluded." 1.3 The learned counsel for the assessee invited our attention to second proviso to s. 153(4) as amended by the Finance Act, 2008, w.e.f. 1st June, 2007 which reads as under: "Provided further that where a proceeding before the Settlement Commission abates under s. 245HA, the period of limitation available under this section to the AO for making an order of assessment, reassessment or re -computation, as the case may be shall, after the exclusion of the period under sub -s. (4) of s. 245HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year; and for the purposes of determining the period of limitation under ss. 149, 153B, 154, 155, 158BE and 231 and for the purposes of payment of interest under s. 243 or s. 244 or, as the case may be, s. 244A this proviso shall also apply accordingly." He further stated that by going through this proviso, the AO was legally bound to complete the pending assessment after 31st July, 2007 but before 31st July, 2008. The AO having failed to complete the assessment within the period of limitation and therefore, the assessment as framed by the AO on 31st March, 2009 is clearly barred by time and deserves to be quashed. The learned counsel further stated that in view of the express provisions of law as laid down under s. 245D(2D) and s. 245HA(1)(ii) r/w Expln. (b) to that section, in cases where the additional tax along with interest have not been paid, before 31st July, 2007, the proceedings before the Settlement Commission stood abated on 31st July, 2007. Thus, the date 31st July, 2007 was specified by the statute itself and leaves no doubt about the same. Once the proceedings before the Income -tax Settlement Commission had abated on 31st July, 2007, it was legally not expected to pass any further order after 31st July, 2007 since by the operation of the statute itself the case got abated on 31st July, 2007 and as such order by the AO had to be passed on or before 31st July, 2008. This is more so because the AO is not competent and not legally permitted to change the specified time of 31st July, 2007 to any other date. Thus, the order as passed by the AO is null, and void ab initio because after the case got abated by the express statutory provisions and consequently the time limitation has also been specified as per second proviso to s. 153(4) as amended by the Finance Act, 2008 w.e.f. 1st June. 2007 and therefore, the assessment as framed by the AO is barred by time. Even otherwise, by virtue of amendment w.e.f. 1st June, 2007, with particular reference to s. 245D(2D), it is made obligatory upon the petitioner to pay the additional tax on the income disclosed before the Settlement Commission on or before 31st of July, 2008 so that the application could be proceeded further for that adjudication. However, due to the circumstances beyond the control of the assessee, the payment of taxes could not be made and therefore, the application of the assessee stood abated w.e.f. 31st July, 2007 and as per second proviso to s. 153(4), the AO was bound to frame the assessment upto 31st July, 2008 and which he having failed to do so, the assessment is clearly barred by time. Also, in the present case, the jurisdiction of the Income -tax Settlement Commission expired on 'specified date', which has been defined in Expln. (b) to s. 245HA and the case stood abated and, in view of the above -said facts and circumstances, any subsequent issuance of notices under s. 143(2) by the AO are clearly barred by time. 2. The learned Departmental Representative, Mr. Tarsem Lal, on the other hand, relied upon the order of the CIT(A) and the remand report of the AO available at pp. 3 and 4 of the order of the learned CIT(A). The relevant para of the said remand report is reproduced for the sake of convenience, as under: "(a) The assessee filed an application under s. 245C of the I.T. Act before Hon'ble Settlement Commission (application No. 9/35/2002/1 -IT on 7th June, 2002 for the block period 1st April, 1990 to 29th Nov., 2000) and regular assessment for asst. yr. 2001 -02. The Hon'ble Settlement Commission passed an order under s. 245D(1) of the I.T. Act, 1961 and allowed the application of the assessee to be proceeded with. Later on the provisions of s. 245D were amended w.e.f. 1st June, 2007 and sub -s. (2D) was inserted which reads as under: "Where an application was made under sub -s. (1) of s. 245C before the 1st day of June, 2007 and an order under the provisions of sub -s. (1) of this section, as they stood immediately before their amendment by the Finance Act, 2007, allowing the application to have been proceeded with, has been passed before the 1st June, 2007, but an order under the provisions of sub -s. (4), as they stood immediately before their amendment by the Finance Act, 2007, was not passed before the 1st June, 2007, such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon, is, notwithstanding any extension of time already granted by the Settlement Commission, paid on or before the 31st day of July, 2007." Further, sub -s. (4A) was also inserted w.e.f. 1st June, 2007 which reads as under: '(i) in respect of an application referred to in sub -s. (2A) or sub -s. (2D), on or before the 31st day of March, 2008. (ii) in respect of an application made on or after the 1st day of June, 2007, within twelve months from the end of the month in which the application was made.' In view of these provisions as no order of the Hon'ble Settlement Commission was received, the proceedings in this case abated on 31st March, 2008 as per provisions of s. 245HA(iv) inserted by Finance Act, 2007 r/w Expln. (d) thereto w.e.f. 1st June, 2007. Accordingly, assessment was completed in this case on 31st March, 2009." 3. The learned CIT(A) vide para. 6 of his order dismissed the grounds of the assessee on the issue and the relevant order of the learned CIT(A) in para. 6 is reproduced for the sake of convenience as under: "6. I have considered the issue raised by the appellant and the comments of the AO on the same, it is clear that the facts of the case under consideration fall under sub -s. 245HA(1)(iv) as the case of the appellant had been duly admitted by the Hon'ble Settlement Commission but no order under s. 245D(iv) could be passed and the specified date in respect of this category of cases is as per cl. (d) of Explanation to s. 245HA which reads as under: "In respect of an application referred to in cl. (iv) on the date on which the time or period specified in sub -s. (4A) of s. 245D expires." It therefore, becomes abundantly clear that the claim of the Authorised Representative on this issue is not warranted by the provisions of law as highlighted above. As such this ground of appeal is dismissed." 4. We have heard the rival contentions and perused the facts of the case. As argued by the learned counsel for the assessee, who read out the provision of s. 245D(2D), which has been reproduced hereinabove, the application under s. 245C(1) has been made before 1st day of June, 2007 and the application was allowed to have been proceeded with, before the 1st day of June, 2007 and no order under sub -s. (4) was passed before the 1st day of June, 2007 and as per provisions of s. 245D(2D), such application shall not be allowed to be further proceeded with unless the additional tax on the income disclosed in such application and the interest thereon is paid on or before the 31st day of July, 2007. There is no dispute to the fact that no tax has been paid on or before 31st day of July, 2007 and therefore, the application was not to be allowed to be further proceeded with and therefore, whether the proceedings before the Settlement Commission have been abated in view of s. 245HA(1)(ii) r/w Expln. (b) on 31st day of July, 2007. Whether the application before the Settlement Commission becomes redundant in such circumstances on 31st July, 2007 being the specified date. As per the learned counsel for the assessee unless Settlement Commission can proceed with, the application under s. 245D(2D) after 31st July, 2007 cannot be adjudicated and there is no occasion for the Settlement Commission to pass an order under s. 245D(4) of the Act and the provisions of s. 245D(4) r/w s. 245D(4A) shall not be applicable and the proceedings of the assessment gets revived as at the specified date i.e. on 31st July, 2007 and not on 31st March, 2008. The learned counsel for the assessee also equated the provisions contained in s. 245D(2A) r/w Explanation which are pari materia to s. 245D(2D) of the Act. 4.1 As regards the case of Revenue, the learned Departmental Representative, Mr. Tarsem Lal, argued that even no taxes have been paid, Settlement Commission is required to pass an order under s. 245D(4) r/w s. 245D(4A)(i) of the Act i.e., before 31st March, 2008 and provisions of s. 245HA(1)(iv) shall be applicable which specifically speaks where no order under s. 245D(4) has been passed within time or period specified under s. 245D(4A) then Expln. (d) to s. 245HA(1) r/w s. 245D(4A) shall apply where the Settlement Commission is required to pass the order by 31st March, 2008 and it is only on 31st March, 2008 the proceedings before the Settlement Commission can abate when no taxes having been paid or no order having been passed by the Settlement Commission and the assessment proceedings are revived w.e.f. 1st April, 2008 only and not before that i.e. 31st July, 2007 as argued by the learned counsel for the assessee. He further argued how could AO assume jurisdiction unless he knows the status of the taxes paid. He also argued that the provisions of s. 245D(2A) and Explanation are on different domain, rather section speaks of abatement in such a case on 31st March, 2008 of the proceedings before the Settlement Commission. Accordingly, he supported the order of the learned CIT(A) and prayed to dismiss the legal ground raised by the assessee. 4.2 On perusal of facts, the controversy before us in short, as argued by the learned counsel for the assessee is that the provisions of s. 245D(2D) shall be applicable r/w s. 245HA(1)(ii), Expln. (b), whereas the Revenue has stated that the provisions of s. 245D(4) r/w s. 245D(4A)(i) and s. 245HA(1)(iv) r/w Expln. (d) shall apply. 4.3 (i) As regards the case of Revenue, as per s. 245D(4A), the Settlement Commission has to pass an order under s. 245D(4) on or before 31st March, 2008 in respect of an application referred to in s. 245D(2D) as in the present case and the section referred to and relied upon by learned counsel for the assessee. The passing of the order under s. 245D(4) r/w s. 245D(4A)(i) is mandatory on the Settlement Commission since statute has used the word 'shall' in s. 245D(4A). (ii) In such cases, the abatement of the proceedings before Settlement Commission is covered under s. 245HA(1)(iv) r/w Expln. (d), according to which the abatement of the proceedings should be on 31st March, 2008 as referred in s. 245D(4A)(i) r/w s. 245D(4) and the AO is required to pass the order by 31st March, 2009, which in fact has been passed on 31st March, 2009. 4.4 Now we peruse the case of assessee, as already discussed in paras hereinabove, that such applications before the Settlement Commission shall not be allowed to be proceeded with unless the additional tax on the income disclosed in such application and the interest thereon is paid on or before 31st day of July, 2007. In the present case, taxes and interest thereon have not been paid on or before 31st July, 2007. In such cases, the abatement of proceedings before Settlement Commission is covered under s. 245HA(1)(ii) r/w Expln. (b) being the specified date i.e. 31st July, 2007. Therefore, the assessee in the present case is covered under s. 245HA(1)(ii) and therefore, the proceedings before the Settlement Commission shall abate on the specified date as referred to in Expln. (b) i.e., 31st July, 2007. In our view once the proceedings before the settlement commission are abated on 31st July, 2007 then there cannot be any occasion for the Settlement Commission to pass any order under s. 245D(4) r/w s. 245D(4A)(i). Also, the proceedings which have been abated once, which is the case of assessee i.e. on 31st day of July, 2007, cannot again abate on a later date i.e., on 31st July, 2008, which is the case of Revenue. The Act is silent on such a situation. To resolve the controversy, the interpretation which favours the assessee, has to be adopted and accordingly the proceedings in the present case before the Settlement Commission get abated on 31st March, 2007 and the proceedings before the AO get revived on 1st Aug., 2007. Therefore, the AO was required to pass the assessment order by 31st July, 2008, which in fact has been passed on 31st March, 2009 and therefore, the assessment by the AO for the impugned block period is barred by limitation. Therefore, the assessment so made is bad in law and the order of learned CIT(A) is reversed on the issue. Therefore, ground No. 1 of the assessee is allowed.;


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