Commissioner Of Income Tax I v. The Income Tax Settlement Commission Additional Bench

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 28.02.2020 Commissioner of Income Tax INo.63-A, Race Course Road,Coimbatore 641 018. ... PetitionerVs. 1.The Income Tax Settlement Commission Additional Bench, No.640, Anna Salai, Nandanam, Chennai 600 028. 2.M/s.R.C.Auto Centre (S.I), Door No.512, Crosscut Road, Coimbatore 641 012....Respondents Prayer: Writ Petition filed under Article 226 of theConstitution of India praying for the issuance of Writ ofCertiorari, to call for the records on the file of the firstrespondent in S.A.No.TN/CB/1/2012-13/1/IT dated 20.06.2012 andquash the same as illegal and without jurisdiction. For Petitioner : Mr.A.P.Srinivas Standing Counsel Heard the learned counsel for the petitioner and thelearned Senior Counsel for the respondents. 2. The petitioner Commissioner of Income Tax is aggrievedby the impugned order dated 20.06.2012 passed by the 1[st]respondent Income Tax Settlement Commission (hereinafterreferred as Settlement Commission) in Settlement ApplicationNo. TN/CB 1/2012-13/1/IT. 3. By the impugned order, the 1[st] respondent SettlementCommission has held that there are no materials to hold thathttps://hcservices.ecourts.gov.in/hcservices/the Settlement Application filed by the 2[nd] respondent on 27.04.2012 for settling the case for the Assessment Years2008-09, 2010-11, 2011-12 & 2012-13 is invalid and correctnessor otherwise of the quantum of income disclosed by the 2[nd]respondent can be examined at a later stage. Accordingly, thepetitioner was directed to submit a report under Rule 9 of theIncome Tax Settlement Commission (Procedure) Rule for furtheraction within 45 days from the receipt of the order. TheSecretary, Income Tax Settlement was required to takenecessary action in this regard. 4. The impugned order was received by the petitioner on05.07.2012. It appears that the present Writ Petition wasprepared as early as September 2012, as it evident from thedate mentioned in the affidavit and in the index to typed setof papers. 5. However, the Writ Petition was filed on 18.12.2012 andan exparte interim order was obtained staying all furtherproceedings on 20.12.2012 before the 1[st] respondent SettlementCommission. 6. Though the order was obtained on 20.12.2012, itappears that the petitioner had failed to communicate thecontent of exparte stay order to the 1[st] respondent SettlementCommission and therefore, the case was taken up for hearing on24.12.2012 by the 1[st]respondent Settlement Commission.According to the 2[nd] respondent, the 1[st] respondent SettlementCommission had also passed order on 24.12.2012 unaware of theabove development. 7. On 24.12.2012, the 2[nd] respondent had conceded forpayment of an additional amount of Rs.60,00,000/- over andabove the amount already offered for settlement in theapplication dated 27.4.2012. Accordingly, the 2[nd] respondentprayed as follows:- i. No penalty under any provision of the IncomeTax Act, 1961 in respect of Settlement ofassessment by the Hon'ble SettlementCommission namely AY(s) 2008-09, 2010-11,2011-12 & 2012-13 and also no prosecution.ii.The tax due on the additional income shall bepaid in two quarterly installments on orbefore 15.03.2013 and on or before30.06.2013.iii.The applicant will be permitted tocapitalise from out of the additionalRs.60,00,000/- an amount equal to the taxpayable. 8. Since both the petitioner and the 2[nd] respondent wereunable to furnish any copy of the order of the 1[st] respondentSettlement Commission purported to have been filed on24.12.2012, the Registry was directed to call for the recordshttps://hcservices.ecourts.gov.in/hcservices/from the 1[st] respondent Settlement Commission. 9. On its receipt of the file, the file was perused.However, on perusal of the file, there is no order of the 1[st]respondent Settlement Commission accepting the case of the 2[nd]respondent. 8. Since both the petitioner and the 2[nd] respondent wereunable to furnish any copy of the order of the 1[st] respondentSettlement Commission purported to have been filed on24.12.2012, the Registry was directed to call for the recordshttps://hcservices.ecourts.gov.in/hcservices/from the 1[st] respondent Settlement Commission. 9. On its receipt of the file, the file was perused.However, on perusal of the file, there is no order of the 1[st]respondent Settlement Commission accepting the case of the 2[nd]respondent. 10. The petitioner appears to have addressed a letterdated 31.12.2012 to the Commissioner of Income Tax (DR),Settlement Commission, Chennai enclosing the copy of the orderdated 20.12.2012 of this Court. The communication addressedto the Commissioner of Income Tax 9DR), Settlement Commission,Chennai, reads as under:- GOVERNMENT OF INDIAINCOME TAX DEPARTMENTOFFICE OF THE COMMISSIONER OF INCOME TAX – I,COIMBATORE63-A, RACE COURSE, COIMBATORE – 641018TF:0422-2220543 Fax:0422-2222743 F.No:125(1)/CIT:1-CBE/12-1331-12-12ToCommissioner of Income Tax (DR),Settlement CommissionChennai – 600 028.Sir,Sub: Settlement Application by M/s.R.C.AutoCentre (SI), Coimbatore - for the AY(s):08-09; 10/11; 11/12 & 12/13 – grantofInterim stay by the Hon'ble High Court of Madras ---reg. A copy of the order dtd: 20-12-2012 (under MP No:1 of 2012 in W.P.No.34365 of 2012) by the Hon'bleHigh Court of Madras granting 'Interim stay' in thecase of CIT-I, Coimbatore Vs. ITSC, AdditionalBench, Chennai & M/s.R.C.Auto Centre (SI),Coimbatore, is enclosed. This office is given tounderstand that the Hon'ble Settlement Commission(ITSC) has passed the order on 24.12.2012, which isafter the “interim stay”. This is being intimatedto you for taking action, as deemed fit. (D.B.Manival Raju),Commissioner of Income – tax,Coimbatore. Copy with the order of the Hon'ble High Court ofMadras, to the:https://hcservices.ecourts.gov.in/hcservices/ i. Secretary, Income Tax Settlement Commission,No:640, Anna Salai, Nandanam, Chennai – 600 028.ii. file – copy. 11. Thus, there are indications that the case was indeedsettled by the 1[st] respondent Settlement Commission and thecase was settled on 24.12.2012. However, there is no orderof the 1[st] respondent Settlement Commission. Therefore, Ishall examine the case on the assumption that no order waspassed on 24.12.2012. 12. The background of the case prior to the abovedevelopment are as follows:- i. The 2[nd] respondent had originally filed anapplication on 27.04.2012 under Section 245C ofthe Income Tax Act, 1961, to settle the caseunder the Chapter XIX-A of the Income Tax Act,1961, for the Assessment Years 2008-09, 2010-11,2011-12 and 2012-13. ii.Thereafter, an order dated 02.05.2012 came to bepassed under Section 245D(1) of the Act.Thereafter, the petitioner was called upon tofurnish a report under Section 245D (2B) of theAct. iii.The petitioner also filed a report dated04.06.2012 before the 1[st] respondent SettlementCommission. It was stated that the time limitfor passing regular assessment under Section 143(3) for the Assessment Years 2008-09 and 201-11had already lapsed and therefore, theapplication to settle the case for theseAssessment Years were liable to be dismissed asnot maintainable. iv.For the Assessment Year 2011-12, it wassubmitted on behalf of the petitioner thatAssessing Officer had not issued any noticeunder Section 143(3) of the Act till the date offiling the application and therefore, on thiscount also, it cannot be stated that theproceedings were pending for these AssessmentYears. v. Before the 1[st] respondent Settlement Commission,the petitioner relied on the following cases:-the petitioner relied on the following cases:- (a)Jayalakshmi Leasing Co. Vs. CIT, (1997) 94 Taxman 236 (ITSC) (SB). (b)CIT Vs. T.V.Sundaram Iyengar & Sons Ltd.,(1999) 236 ITR 524 (MAD). https://hcservices.ecourts.gov.in/hcservices/ iv.For the Assessment Year 2011-12, it wassubmitted on behalf of the petitioner thatAssessing Officer had not issued any noticeunder Section 143(3) of the Act till the date offiling the application and therefore, on thiscount also, it cannot be stated that theproceedings were pending for these AssessmentYears. v. Before the 1[st] respondent Settlement Commission,the petitioner relied on the following cases:-the petitioner relied on the following cases:- (a)Jayalakshmi Leasing Co. Vs. CIT, (1997) 94 Taxman 236 (ITSC) (SB). (b)CIT Vs. T.V.Sundaram Iyengar & Sons Ltd.,(1999) 236 ITR 524 (MAD). https://hcservices.ecourts.gov.in/hcservices/ (c)Director of Income Tax (InternationalTaxation) Kolkata Vs. Income TaxSettlementCommissioner,AdditionalBench, Kolkata & Anr., [2012] 1 CAL LT309: 2011 SCC OnLine Cal 5547.vi.On behalf of the 2[nd] respondent (applicant)strong reliance was placed on the decision ofthe Settlement Commission (Special Branch) inthe case of Rescuwear Corporation, In re, (2009)177 Taxman 281 (ITSC) (SB). vii.Reliance was also placed on the CBDT CircularNo.3 of 2008 dated 12.03.2008 215 CTR (St.) 225,wherein, it was clarified as follows:- Under the existing provisions, anassessee may make an application to theCommission at any stage of theproceedings in his case pending beforeany income -tax authority. After31.05.2007, an assessee can make anapplication to the Commission only duringthe pendency of the proceedings beforethe Assessing Officer. It is furtherclarified that (a) since intimation u/s. 143(1) is notan assessment order there will be no barin filing an application for settlementsubsequent to receipt of an intimationu/s. 143(1). It is not material whethertime-limit for issue of notice u/s. 143(2) has expired or not; (b) the assessment shall be deemed tohave been completed only on the date ofassessment order to the applicant. viii.The 1[st]respondent Settlement Commissionconsidered decisions cited by the petitioner andultimately concluded that when Returns of IncomeTax were filed by the 2[nd] respondent (applicant)as accepted under Section 143(1) of the Act andno notice was issued under Section 143(2) of theAct, the 2[nd] respondent (applicant) could fileSettlement Application even after the time limitfor passing the regular assessment order underSection 143(3) of the Act as no assessment hasbeen made in this case as per Clause (iv) ofSection 245A of the Act. 13. While passing the impugned order, the 1[st] respondentSettlement Commission has also extracted a portion of reportdated 16.05.2012 of the petitioner, which reads as under:-https://hcservices.ecourts.gov.in/hcservices/ “The assessee has filed settlement applicationfor the A.Ys. 2008-09, 2010-11, 2011-12 and2012-13 in S.A.No. TN/CB 1/2012-13/1/IT. Inview of explanation (iv) to Section 245A ofthe Income-tax Act, 1961, the application forthese years may be taken as valid. 14. The petitioner has also stated in report dated04.06.2012 as follows:- 2.1. Validity of the application for therelevant years: The assessee's Income taxReturn, for the AY: 2008-09, was notscrutinized; but, can be re-opened on thebasis of the information obtaining for the AY:09-10, if the 'Commission' rejects theapplication. The Return of Income (RI) forAY:2010-11 was not selected for scrutinythrough the CASS; but, can be re-opened on thebasis of the information obtaining for the AY:09-10, if the 'Commission' rejects theapplication. And, there is probability ofsection of RI of AY: 2011-12 for scrutiny byCASS; alternatively, it can be selectedmanually for scrutiny, if the 'Commission'rejects the application. In view of theforegoinginformationthefilingtheSettlement Application is found valid as, ason the date, no proceedings are pending. 15. It is stated that the words “valid” appears to betypographical mistake. 15. It is stated that the words “valid” appears to betypographical mistake. 16. I have considered the arguments advanced by thelearned counsel for the petitioner and the learned seniorcounsel for the respondents. 17. Though before the 1[st] respondent Settlement Commissionthe petitioner had seemingly conceded the maintainability ofthe application under section 245C of the Income Tax Act,1961, however, before this court the petitioner has taken acontra stand. 18. The petitioner has taken a categorical stand that theapplication filed under Section 245C of the Income Tax Act,1961 was invalid. It is submitted that with a view to avoiddelay in determining the tax liability which are causedbecause of factors like duplication of proceedings, absence ofstatutory time frame for settling the case and also with aview to streamline the proceedings before the SettlementCommission, the provision of Chapter XIX-A of the Income TaxAct, 1961 was amended, w.e.f. 01.06.2007. https://hcservices.ecourts.gov.in/hcservices/ 19. It was stated that the prior to amendment, anassessee could file an application at any stage of proceedingsin respect of the case pending before any Income TaxAuthorities but however after 2007 the position was different. 20. Even though the impugned order was passed on20.06.2012 and was received by the petitioner’s office on05.07.2012 the petitioner did not take any steps to challengethe same before this court till 18.12.2012. 21. The writ petition was filed on 18.12.2012 despite thefact that the petitioner was required to submit a report underRule 9 of Income Tax Settlement Commission (Procedure) withina period of forty five days from date of receipt of theimpugned order. 22.To this effect, there were inter-departmentaldeliberations and exchange of communications in the form ofreport of the Income Tax Officer on 27.07.2012; report of theJoint Commissioner of Income Tax on 7.08.2012 and a report ofthe petitioner under section 245D (2C) of the Income Tax Act,1961. 23. Thus, having acquiesced to the impugned order, thepetitioner has filed the present writ petition on 18.12.2012.Having acquiesced into the proceedings before the 1[st]respondent Settlement Commission, it was not open for thepetitioner to challenge the impugned order. 24. It further appears that the writ petition appears tohave been made ready as early 21.09.2012 but its filing waspostponed to 18.12.2012 for reasons best known to thepetitioner. 25. It is further noticed that though an exparte interimstay was granted by this court on 20.12.2012 the content ofthe order was communicated after 24.12.2012. No attempt wasmade to communicate the order of this Court to the 1[st]respondent Settlement Commission on 24.12.2012. 26. The 1[st] Respondent Settlement Commission proceeded toaccept a memo from the 2[nd] respondent on the said dated. The 1[st]Respondent agreed to pay an additional amount of Rs.60 lakhs,i.e. Rs.10 lakhs each for the Assessment Years 2008-09 and2010-11 and Rs.20 lakhs each for the Assessment Years 2011-12and 2012-13. 27. Since the Writ petition has been kept pending, itwould be therefore appropriate to pass order on mertisafter examining the rival contention of the parties. https://hcservices.ecourts.gov.in/hcservices/ 28. The issue to be decided is whether the 1[st] respondentSettlement Commission was justified in admitting the case ofthe 2[nd] respondent for settlement. In other words, whether the2[nd] respondent was entitled to file an application forsettlement of cases under Section 245C of the Income Tax Act,1961 as amended with effect from 01.06.2007, for theAssessment Years 2008-09, 2010-11, 2011-12 and 2012-13. 27. Since the Writ petition has been kept pending, itwould be therefore appropriate to pass order on mertisafter examining the rival contention of the parties. https://hcservices.ecourts.gov.in/hcservices/ 28. The issue to be decided is whether the 1[st] respondentSettlement Commission was justified in admitting the case ofthe 2[nd] respondent for settlement. In other words, whether the2[nd] respondent was entitled to file an application forsettlement of cases under Section 245C of the Income Tax Act,1961 as amended with effect from 01.06.2007, for theAssessment Years 2008-09, 2010-11, 2011-12 and 2012-13. 29. As per Section 245C of the Income Tax Act, 1961, anassessee may at any stage of the “case” relating to him maymake an application in such form and in such manner as may beprescribed containing the full and true disclosure of hisincome which has not been disclosed before the AssessingOfficer, the manner in which such income has been derived,additional amount of income tax payable on such income andsuch other particular as may be prescribed by the SettlementCommission to have the case settled and any such applicationshall be disposed in the manner specified therein. 30. Section 245 C of the Income Tax Act, 1961 read as under:- 245C. (1) An assessee may, at any stage of acase relating to him, make an application insuch form and in such manner as may beprescribed, and containing a full and truedisclosure of his income which has not beendisclosed before the Assessing Officer, themanner in which such income has been derived,the additional amount of income-tax payable onsuch income and such other particulars as maybe prescribed, to the Settlement Commission tohave the case settled and any such applicationshall be disposed of in the manner hereinafterprovided:Provided that no such application shall bemade unless,— (i) in a case where proceedings for assessmentor reassessment for any of the assessmentyears referred to in clause (b) of sub-section(1) of section 153A or clause (b) of sub-section (1) of section 153B in case of aperson referred to in section 153A or section153C have been initiated, the additionalamount of income-tax payable on the incomedisclosed in the application exceeds fiftylakh rupees, (ia) in a case where— (A) the applicant is related to the personreferred to in clause (i) who has filed anapplication (hereafter in this sub-sectionreferred to as "specified person"); and https://hcservices.ecourts.gov.in/hcservices/ (i) in a case where proceedings for assessmentor reassessment for any of the assessmentyears referred to in clause (b) of sub-section(1) of section 153A or clause (b) of sub-section (1) of section 153B in case of aperson referred to in section 153A or section153C have been initiated, the additionalamount of income-tax payable on the incomedisclosed in the application exceeds fiftylakh rupees, (ia) in a case where— (A) the applicant is related to the personreferred to in clause (i) who has filed anapplication (hereafter in this sub-sectionreferred to as "specified person"); and https://hcservices.ecourts.gov.in/hcservices/ (B) the proceedings for assessment or re-assessment for any of the assessment yearsreferred to in clause (b) of sub-section (1)of section 153A or clause (b) of sub-section(1) of section 153B in case of the applicant,being a person referred to in section 153A orsection 153C have been initiated,the additional amount of income-tax payable onthe income disclosed in the applicationexceeds ten lakh rupees,(ii) in any other case, the additional amountof income-tax payable on the income disclosedin the application exceeds ten lakh rupees,and such tax and the interest thereon, whichwould have been paid under the provisions ofthis Act had the income disclosed in theapplication been declared in the return ofincome before the Assessing Officer on thedate of application, has been paid on orbefore the date of making the application andthe proof of such payment is attached with theapplication.Explanation.—For the purposes of clause (ia),—(a) the applicant, in relation to thespecified person referred to in clause (ia),means,—(i) where the specified person is anindividual, any relative of the specifiedperson;(ii) where the specified person is a company,firm, association of persons or Hinduundivided family, any director of the company,partner of the firm, or member of theassociation or family, or any relative of suchdirector, partner or member;(iii) any individual who has a substantialinterest in the business or profession of thespecified person, or any relative of suchindividual; (iv) a company, firm, association of personsor Hindu undivided family having a substantialinterest in the business or profession of thespecified person or any director, partner ormember of such company, firm, association orfamily, or any relative of such director,partner or member;(v) a company, firm, association of persons orHindu undivided family of which a director,partner or member, as the case may be, has asubstantial interest in the business orprofession of the specified person; or anydirector, partner or member of such company,firm, association or family or any relative ofsuch director, partner or member; https://hcservices.ecourts.gov.in/hcservices/ (vi) any person who carries on a business orprofession,— (A) where the specified person being anindividual, or any relative of such specifiedperson, has a substantial interest in thebusiness or profession of that person; or(B) where the specified person being acompany, firm, association of persons or Hinduundivided family, or any director of suchcompany, partner of such firm or member of theassociation or family, or any relative of suchdirector, partner or member, has a substantialinterest in the business or profession of thatperson;(b) a person shall be deemed to have asubstantial interest in a business orprofession, if— https://hcservices.ecourts.gov.in/hcservices/ (vi) any person who carries on a business orprofession,— (A) where the specified person being anindividual, or any relative of such specifiedperson, has a substantial interest in thebusiness or profession of that person; or(B) where the specified person being acompany, firm, association of persons or Hinduundivided family, or any director of suchcompany, partner of such firm or member of theassociation or family, or any relative of suchdirector, partner or member, has a substantialinterest in the business or profession of thatperson;(b) a person shall be deemed to have asubstantial interest in a business orprofession, if— (A) in a case where the business or professionis carried on by a company, such person is, onthe date of search, the beneficial owner ofshares (not being shares entitled to a fixedrate of dividend, whether with or without aright to participate in profits) carrying notless than twenty per cent of the voting power;and(B) in any other case, such person is, on thedate of search, beneficially entitled to notless than twenty per cent of the profits ofsuch business or profession. 31. The expression “case” is used in Seciton 245C of theIncome Tax Act, 1961. This expression is defined in Section245A(b). It read differently when the application was filed on27.4.2012 by the 2[nd] respondent before the 1[st] Respondent. Thisdefiniton now reads differntly. Both the definitions arereproduced below:- Table :1Section 245A(b) duringAs it reads now and at the2012time of the application (b) "case" means any(b)"case"meansanyproceedingforproceedingforassessmentassessment under thisunder this Act, of any personAct, of any person inin respect of any assessmentrespectofanyyear or assessment years whichassessment year ormay be pending before anassessment years whichAssessing Officer on the datemay be pending beforeon which an application underan Assessing Officersub-section (1) of sectionon the date on which245C is made. an application underExplanation.—For the purposessub-section (1) ofof this clause—Section 245C is made:(i)aproceedingforProvided that—assessment or reassessment or(i) a proceeding forrecomputation under sectionassessmentor147 shall be deemed to havereassessmentorcommenced—recomputationunder(a) from the date on which asection 147;notice under section 148 is(ii) [***]issued for any assessmentyear;(iii) [***](b) from the date of issuance(iv) a proceeding forof the notice referred to inmakingfreshsub-clause (a), for any otherassessmentinassessment year or assessmentpursuance of an orderyears for which a notice underunder section 254 orsection 148 has not beensection 263 or sectionissued, but such notice could264, setting aside orhave been issued on such date,cancellinganif the return of income forassessment,the other assessment year orshallnotbeaassessment years has beenproceedingforfurnished under section 139 orassessment for thein response to a notice underpurposesofthissection 142;clause.(ii) [***]Explanation.—For the(iii) a proceeding for makingpurposesofthisfresh assessment in pursuanceclause—of an order under section 254(i) a proceeding foror section 263 or section 264,assessmentorsetting aside or cancelling anreassessmentorassessment shall be deemed torecomputation referredhave commenced from the dateto in clause (i) ofon which such order, settingthe proviso shall beasideorcancellingandeemedtohaveassessment was passed;commenced from the(iiia) a proceeding for assessmentdate on which a noticeor reassessment for any of theunder section 148 isassessment years, referred toissued;in clause (b) of sub-section(ii) [***](1) of section 153A in case of https://hcservices.ecourts.gov.in/hcservices/ 32. Sine Qua Non for filing an application under Section245C of the Income Tax Act, 1961 is pendency of a “case”before an assessing officer. https://hcservices.ecourts.gov.in/hcservices/ 32. Sine Qua Non for filing an application under Section245C of the Income Tax Act, 1961 is pendency of a “case”before an assessing officer. 33. A plain reading of Explanation (iv) to Section 245Aas it stood during the period in dispute indicates that anassessment proceeding is deemed to have commenced from thedate of 1[st] day of assessment year and concludes on the date onthe date of assessment. 34. Circular No.3 of 2008 dated 12.03.2008 was in forcewhen the impugned order was passed. It clarified under whatcircumstances an application under Section 245 C of theIncome Tax Act, 1961 can be filed. 35. The above clarification was modified later vide aCircularNo.16/2014[F.No.142/14/2007-TPL(PART)]dated17.11.2014. Though both the clarifications are not binding onthis Court, nevertheless relevant portion of these twocirculars are referred to. They are reproduced below:- Table : 2 Circular No.3 of 2008,Circular No.16/2014dated 12.03.2008[F.No.142/14/2007-TPL(PART)] dated 17.11.2014 https://hcservices.ecourts.gov.in/hcservices/ 61.2. Under the existing“61.2 Under the existingprovision, an assesseeprovisions, an assesseemay make an applicationmay make an application toto the Commission at anythe Commission at anystage of the proceedingsstage of the proceedingsin his case pendingin his case pending beforebefore any income-taxanyIncome-taxauthorities. After 31[st]Authorities. After 31[st]May, 2007, an assesseeMay, 2007, an assessee cancan make an applicationmake an application to theto the Commission onlyCommission only during theduring the pendency ofpendencyofthethe proceedings beforeproceedings before thethe Assessing Officer.Assessing Officer. It isIt is further clarifiedfurther clarified that (a)that (a) since intimationsince intimation underunder section 143(1) issection 143(1) is not annot an assessment order,assessment order, therethere will be no bar inwill be no bar in filingfiling an application foranapplicationforsettlement subsequent tosettlement subsequent toreceipt of an intimationreceipt of an intimationunder Section 143(1). Itunder section 143(1). Itis not material whetheris not material whetherin time limit for issuetime-limit for issue ofof notice under sectionnotice under section 143143(2) has expired or(2) has expired or not;not; (b) the assessment(b) the assessment shallshall be deemed to havebe deemed to have beenbeen completed only oncompleted on the date onthe date of service ofwhich the assessment orderassessment order to theis passed.”applicant. 36. As per Circular No.3 of 2008 dated 12.03.2008assessment shall be deemed to have been completed on the dateof service of assessment order to the applicant. 37. However,asperCircularNo.16/2014[F.No.142/14/2007-TPL(PART)], assessment shall be deemed tohave been completed on the date on which the assessment orderis passed. 38. This clarification was in tune with Explanation (iv)as was in force in 2012. In 2015, Explanation (iv) to Section245A of the Income Tax Act, 1961 was amended [see right handcolumn of Table: 1]. https://hcservices.ecourts.gov.in/hcservices/ 39. As per the above amendment, a proceeding forassessment for any assessment year other under than threespecified instances shall be deemed to have commenced - (i) from the date on which the return of incomefor that assessment year is furnished underSection 139; or (ii) in response to a notice served under section142.and concluded on (a) the date on which the assessment is made;or (b) on the expiry of the time specified for makingassessment under sub-section (1) of section 153,in case where no assessment is made. 38. This clarification was in tune with Explanation (iv)as was in force in 2012. In 2015, Explanation (iv) to Section245A of the Income Tax Act, 1961 was amended [see right handcolumn of Table: 1]. https://hcservices.ecourts.gov.in/hcservices/ 39. As per the above amendment, a proceeding forassessment for any assessment year other under than threespecified instances shall be deemed to have commenced - (i) from the date on which the return of incomefor that assessment year is furnished underSection 139; or (ii) in response to a notice served under section142.and concluded on (a) the date on which the assessment is made;or (b) on the expiry of the time specified for makingassessment under sub-section (1) of section 153,in case where no assessment is made. 40. The 2015 amendment for the first time makes it veryclear that an assessment proceeding shall stand concludedunder the above two mentioned circumstances. In other words,if no assessment order is passed, no assessment proceedingshall be deemed to be pending after the expiry of twoyears. 41. The Gujarat High Court in Commissioner of Income TaxVs. Income Tax Settlement Commission, [2013] 59 CTR 329 hasobserved that the statutory provisions particularly section245A(b) which defines expression “case” was amended witheffect from 01.06.2007 and that after the aforesaid amendmentto the definition in Section 245A(b) of the Income Tax Act,1961, the term “case” would cover any proceedings before anAssessing Officer on the date on which the application undersection 245 C (1) is made. 42. The court further observed that large number of otherproceedings, such as, arising out of assessment orreassessment under section 147 of the Act or appeal orrevision pending before IT authorities would no longer begoverned by newly introduced the definition of the term“case”. 43. The Gujarat High Court has further interpreted thepurport of Circular No.3 of 2008 dated 12.03.2008 andconcluded that nowhere it brings about a situation where evenby virtue of efflux of time, where it is no longer possiblefor the assessing officer to pass any order of assessment withrespect to an assessee for a particular assessment year, acase for assessment should be deemed to be pending before theassessing officer in terms of clause (b) of section 245 A ofhttps://hcservices.ecourts.gov.in/hcservices/the Act because such a case was not taken in scrutiny and was accepted under section 143 (1) of the Income Tax Act, 1961without passing any order of assessment. 44. The Gujarat High Court further interpreted thedecision of the Special Bench of the Settlement Commission inRescuwear referred to supra . 45. The Gujarat High Court in Commissioner of Income TaxVs. Income Tax Settlement Commission, [2013] 59 CTR 329followed the reasoning of the single judge of the CalcuttaHigh Court in the case of Director of IT (InternationalTaxation) Vs. Income Tax Settlement Commissioner and others,[2012] 1 CAL LT 309 : 2011 SCC OnLine Cal 5547, passed on1.8.2011 which in turn followed the decision of the GujaratHigh Court in Ram Bhai Jethbhai Patel Vs. CIT, [1997] 108 ITR771 Gujarat. 46. The Court in Ram Bhai Jethbhai Patel Vs. CIT, [1997]108 ITR 771 Gujarat held that “It is difficult to accept thesubmission that Explanation (iv)Section 245 A (b) is to beconstrued to provide that for assessment could only concludewith the passing of an assessment order of assessment and noorder of assessment was made, such proceeding would be deemedto continue for a period of six years and nine months from theend of the relevant assessment years, within which period andassessment could be made under section 147 after issuing anotice under section 148”. 46. The Court in Ram Bhai Jethbhai Patel Vs. CIT, [1997]108 ITR 771 Gujarat held that “It is difficult to accept thesubmission that Explanation (iv)Section 245 A (b) is to beconstrued to provide that for assessment could only concludewith the passing of an assessment order of assessment and noorder of assessment was made, such proceeding would be deemedto continue for a period of six years and nine months from theend of the relevant assessment years, within which period andassessment could be made under section 147 after issuing anotice under section 148”. 47. Following the above ratio, the Gujarat High Courtheld that for the assessment years 2005-6 to 2008-09assessment had become time-barred without any notice undersection 143 (2) of the Act. Even time-limit for passing theorder is even of such notices issued had expired by the timethe assessee had filed application for settlement before theSettlement Commission and therefore application qua thoseassessment years were held not maintainable. 48. In Commissioner of Income Tax Vs. Income TaxSettlement Commission, [2012] 27 Taxmann.com 239 (Delhi), thedecision of the Calcutta High Court in Director of IT(International Taxation) Vs. Income Tax SettlementCommissioner and others, [2012] 1 CAL LT 309 : 2011 SCC OnLineCal 5547 was extracted to arrive at the conclusion. 49. The Delhi High reproduced the following paragraphfrom the decision of the Calcutta High Court in Director ofIT (International Taxation) Vs. Income Tax Settlementhttps://hcservices.ecourts.gov.in/hcservices/Commissioner and others, [2012] 1 CAL LT 309 : 2011 SCC OnLine 31. In the case of Rambhai Jethabhat Patel v.CIT reported in 108 ITR 771, the Gujarat HighCourt held that it could safely be said that amatter could be said to be pending in a Courtof Justice when any proceedings could be takenin it and that was test which was required tobe applied. 32. If the aforesaid test is appliedproceedings could only be said to be pendingfor as long as any proceedings could be taken,excluding proceedings under section 147 whichconsciously been excluded by Parliament in itswisdom. 33. An application appended to a section, toexplain the meaning of words contained in thatsection, should normally be read to harmonizewith and clear up any ambiguity in the mainsection and should not be construed to widenthe ambit of the section. 34. It is difficult to accept the submissionthat Explanation iv to section 245A(b) is to beconstrued to provide that proceedings forassessment could only conclude with the passingof an assessment order of assessment and if noorder of assessment was made, such proceedingswould be deemed to continue for a period of sixyears and nine months from the end of therelevant assessment year, within which periodan assessment could be made under section 147after issuing a notice under section 148. 35. Construed literally, Explanation (iv) tosection 245A(b) would give rise to absurdity,for proceedings would be deemed to continueeternally, if no order of assessment were madeand no notice under section 148 were issued.The interpretation suggested by Dr. Pal thatproceedings would be deemed to continue for aperiod of six years and nine months from theend of the relevant Assessment Year, withinwhich period as assessment might be done undersection 147, upon notice under section 148would also involve some modification of theliteral meaning of the Explanation iv tosection 245A(b).36. There can be no dispute with theproposition that where a strict and literalinterpretation produces an absurd and unjustresult, which could never have been theintention of the legislature, the Court mightmodify the language used by the legislature ordo some violence to it so as to achieve the https://hcservices.ecourts.gov.in/hcservices/ https://hcservices.ecourts.gov.in/hcservices/ obvious intention of the legislature andproduce a rational construction. 37. As held in K.P. Varghese v. Income TaxOfficer reported in 131 ITR 597 (SC) and asheld by Lord. Denning in (1969) 2 All. E.R. 912and approved by the Supreme Court in AIR 1997SC 1519 “whenever a statute comes up forconsideration it must be remembered that it isnot within the human powers to foresee themanifold sets of facts which may arise and evenif it were, it is not possible to provide forthem in terms free from all ambiguity. Thequestion a Judge should ask himself is to howthe makers of the Act would themselves haveresolved the ruck? A Judge is not to altermaterial of which the Act is woven and shouldhave to iron out the creases”. 38. Since the legislature has, in its wisdom,very consciously excluded proceedings undersection 147, from the purview of a settlementapplication, this Court ought not to interpretthe expression ‘case’ in a manner that would ineffect bring within the purview of a settlementapplication, something which has consciouslybeen excluded by the legislature. 39. If two reasonable constructions of a taxingprovision are possible, the construction whichfavours the assessee must be adopted. There canbe no dispute with the proposition of law laiddown by the Supreme Court in CTT v. VegetableProducts Ltd. reported in 88 ITR 192 (SC) 195.However,asobservedabove,literalconstruction of Explanation iv would give riseto absurdity. This Court meaningfully construesthe said explanation to mean that pendingassessment proceedings would conclude with anorder of assessment, and where no order ofassessment is made, the proceedings wouldlapse, when an order can no longer be made, byreason of expiry of the statutory time limitunder section 153(1). 40. This Court is constrained to hold thatirrespective of whether returns were filed ornot, a case would be deemed to be pending butonly for twenty one months from the end of theassessing year in question, i.e. the periodwithin which an assessment could have beenmade. Once the aforesaid time period expires,it cannot be said that the proceedings arepending. 50. The Delhi High Court held that the Parliament hadhttps://hcservices.ecourts.gov.in/hcservices/consciously directed the tax administrators not to entertain settlement application, in case where assessment notices wereissued. It observed that “parliamentary intent having beenexpressed in clear terms, the court cannot, by adopting astrained interpretation, thwart it, by holding that in case anotice is issued; the assessee had to file a return, whichwill be considered a fresh return, in which case a freshperiod has to be reckoned”. 51. The court held that “it is inconceivable as to howproceeding could have been deemed to continue indefinitely, incases where no assessment order is made under section 143/144. 52. It further observed that Explanation (iv) to Section245A(b) cannot be construed so literally so as to leave the“proceedings” in limbo for an eternity. The rule prescribed ins. 153(1) must be given effect to despite Explanation. (iv). 53. It is clarified that Explanation. (iv) merely caststhe deeming provision in respect of assessments which canstill be validly made. Where by application of Section 153, anassessment order can no longer be made, the proceeding, forpurposes of Section 245A, would have to be construed asterminated. 54. The court also held that after the expiry of theperiod for completion of assessment under section 153 of theIncome Tax Act, 1961 an assessment order can no longer bemade. 55. The ratio of the Calcutta High Court in Director ofIT (International Taxation) referred to supra which has beenquoted with approval both by the Delhi High Court and theGujarat High Court dealt with a slightly different situationand therefore the ratio of the Calcutta High Court wasmisapplied. 54. The court also held that after the expiry of theperiod for completion of assessment under section 153 of theIncome Tax Act, 1961 an assessment order can no longer bemade. 55. The ratio of the Calcutta High Court in Director ofIT (International Taxation) referred to supra which has beenquoted with approval both by the Delhi High Court and theGujarat High Court dealt with a slightly different situationand therefore the ratio of the Calcutta High Court wasmisapplied. 56. The Calcutta High Court was concerned with issuewhere no returns were filed under Section 139 and therefore noassessment could be made except under Section 147 of theIncome Tax Act, 1961. Therefore, the context in which the saiddecision was rendered should not be lost sight of whileapplying the ratio to the facts of the case. 57. To understand the conclusion in paragraphs 31 to 40(extracted supra) in the decision of the Calcutta High Courtin Director of IT (International Taxation) referred to supra,Paragraph 27 to 29 also should be read. Paragraph 27 to 29has set the context. They are extracted below:- https://hcservices.ecourts.gov.in/hcservices/ 27. However, a proceeding for assessment undersection 147 has clearly been excluded from thepurview of pending proceedings for the purposeof making a settlement application. Thequestion is whether an application forsettlement can still be filed even thoughreturns have not been filed, and no assessmentcan be made, except under section 147 of theIncome Tax Act, by reason of the statutorytime limit under section 153(1) for making anassessment under section 143.28. While Dr. Pal rightly argued thatproceedings for assessment for any assessmentyear had to be deemed to have commenced fromthe first day of the assessment year, if noreturn had been filed before the date offiling of the settlement application, it isdifficult to accept Dr. Pal's submission thatthe proceedings would be deemed to continueeven after expiry of the statutory time limitfor making an order of assessment and untilsuch time as notice, if any, under section 148were issued. After the amendment only thecases pending before the Assessing Officer onthe date on which an application under sub-section (1) of section 245C is made, comeswithin the definition of the word ‘case’appearing in section 245A(b). 29. If Parliament in its wisdom excludedproceedings under section 147 from the purviewof pending proceedings, Explanation iv to thedefinition of ‘case’ in section 245A(b) cannotbe construed to include within the purview ofpending proceedings, the requisite time periodfor issuance of notice for proceedings underthe aforesaid section. 58. Thus, the ratio of the Calcutta High Court thoughcorrect, is not applicable to the fact of the present case. Itwas not applicable to the facts of the two cases of theGujarat and Delhi High Court. 59. The Calcutta High Court was not concerned with thesituation where the returns were filed but no assessmentorders were passed like in the present case. The Calcutta HighCourt was concerned with situation where the assessee hadnot filed returns in time and therefore a notice under Section148 of the Income Tax Act, 1961 was issued. 60. Therefore, the Court concluded that though proceedingcommenced with the filing of return for the purpose of 147 ofthe Income Act1961, yet no case was pending for the purpose ofSection 245A of the Income Tax Act, 1961. https://hcservices.ecourts.gov.in/hcservices/ 61. The last date for completing the assessment for these3 assessment years expired only on 31.12.2012; 31.12.2013 andon 31.12.2014 for Assessment Years 2010-11, 2011-12 and 2012-13 respectively. 62. In the present case, when the application was fil