Kailash Chand Manoj Kumar Sarraf (P) Ltd v. Asst. Commissioner Of Income Tax, Central Circle-Kota(Rajasthan

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR (1) S. B. Civil Writ Petition No. 1398 / 2017 Kailash Chand Manoj Kumar Sarraf (P) Ltd., 82, Shopping Centre,Kota (Rajasthan) through its Director Kailash Chand, aged about81 Years, R/o Kothi Manak Bhawan, Subzi Mandi, Kota ----Petitioner Versus Asst. Commissioner of Income Tax, Central Circle-Kota(Rajasthan) ----RespondentConnected With (2) S. B. Civil Writ Petition No. 1400 / 2017 Kailash Chand Jain S/o Late Manak Chand, Jain, aged about 81Years, R/o Kothi Manak Bhawan, Subzi Mandi, Kota (Rajasthan) ----Petitione Versus Asst. Commissioner of Income Tax, Central Circle-Kota(Rajasthan) ----Respondent _____________________________________________________ For Petitioner(s) : Mr. Sanjay Jhanwar with Mr. Prakul Khurana.For Respondent(s) : Mr. Anil Mehta with Ms. Archana. _____________________________________________________ HON'BLE MR. JUSTICE MOHAMMAD RAFIQ Order 07/03/2017 These two writ petitions has been filed by thepetitioners with identical prayer that order dated 19.12.2016passed by the Income Tax Settlement Commission, AdditionalBench-II, New Delhi(for short ‘the Settlement Commission’) maybe quashed and set aside and the Settlement Commission may be directed to complete the proceedings expeditiously. Facts of the case are that the petitioners earlier filedD.B. Civil Writ Petition No. 6089/2008 and 6090/2008 beforeDivision Bench of this Court challenging constitutional validity ofprovisions of Section 245D(4A) and 245HA of the Income Tax Act,1961(for short ‘the Act’) as substituted/inserted by the FinanceAct, 2007 insofar as providing for the automatic abatement ofsettlement application, if no final order is passed by theSettlement Commission before 31.03.2008. Said writ petitionswere disposed off by Division Bench of this Court vide order dated25.04.2016 directing the Settlement Commission to complete thesettlement proceedings within a period of six months from thedate of receipt of copy of that order. The petitioners claim to haveserved copy of aforesaid order before the Settlement Commissionwith letter dated 27.06.2016. The petitioners then made arequest vide letter dated 29.06.2016 to the Principal Bench of theSettlement Commission to take up the matters urgently in view ofthe time limit fixed by Division Bench of this Court. However,since the jurisdiction of the case was transferred to the AdditionalBench of the Settlement Commission, matters could not beimmediately taken up. Pursuant to letter written by theSecretary, Additional Bench(II) New Delhi to the Secretary,Principal Bench, New Delhi seeking transfer of the record from thePrincipal Bench to Additional Bench, it transpired that the recordsof the cases of the petitioners were not traceable. The Chairmanof the Settlement Commission approved for reconstruction of the files and in that process, considerable time was consumed and thefiles could be reconstructed towards the end of September, 2016.In the meantime, reports under Rule 9 of the Rules could becalled from the Income Tax Department vide letter dated02.09.2016. Mr. Sanjay Jhanwar, learned counsel for the petitioners files and in that process, considerable time was consumed and thefiles could be reconstructed towards the end of September, 2016.In the meantime, reports under Rule 9 of the Rules could becalled from the Income Tax Department vide letter dated02.09.2016. Mr. Sanjay Jhanwar, learned counsel for the petitioners argued that proceedings were resumed by the SettlementCommission at a time when less than four months time was left tocomplete the time limit fixed by this Court. All earnest effortswere made by the petitioners to get the dispute settled with theIncome Tax Department within the remaining time period.However, the Settlement Commission vide order dated19.12.2016 declined to complete the proceedings and allowed itto be abated by observing that the request of Pr. CIT to grantperiod of one and half month is justified and therefore, the finalorder cannot be passed within the stipulated period of six months.Learned counsel submitted that the Settlement Commission wasunjustified in making the observation that adjournments weresought by the petitioners. It is contended that only two shortadjournments were sought by the petitioners, out of which firstwas on account of compelling circumstances and the voluminouswork involved and second adjournment was sought due to deathof the father of Shri Neeraj Jain, who was handling the matters onbehalf of the petitioner, as counsel. The Settlement Commissionhas overlooked the fact that as long as 2 months and 5 days timewas wasted on account of the fact that original records of the cases were not traceable and the files had to be reconstructedunder the order of the Chairman of the Settlement Commission.Therefore, abatement proceedings in these cases were notjustified. The petitioner alternatively filed application in theaforesaid writ petitions seeking extension of time limit prescribedby the Court for adjudication of Settlement Application. It issubmitted that on account of abatement of the proceedings by theSettlement Commission, Income Tax Department authorities arenot proceedings with the regular assessment and served notice onthe petitioners on 04.01.2017. Left with no option, the petitionerhad to file these writ petitions. It is, therefore, prayed thatimpugned order passed by the Settlement Commission may be setaside and reasonable time may be granted/extended to theSettlement Commission to concluding the settlement proceedings. Learned counsel for the petitioners, in support of hisarguments relied upon the judgment of the Bombay High Court inStar Television News Limited Vs. Union of India, (2009)225 CRT (Bom) 140 wherein it was held that fixing the cutoffdate as 31.03.2008 was arbitrary and the provisions of Section245HA(1)(iv) to that extent will be also arbitrary. Instead ofstriking down the said provision, Bombay High Court has readdown the same by observing that the proceedings could be takento be abated in the event the application could not be disposed offfor any reasons attributable on the part of the applicant, who hasmade an application under Section 245C. Reliance is also placedupon the judgment of the Supreme Court in Union of India Vs. Star Television News Limited, (2015) 12 SCC 665 whereinthe Supreme Court declined to interfere with the aforesaidjudgment of Bombay High Court, but issued certain directions. Star Television News Limited, (2015) 12 SCC 665 whereinthe Supreme Court declined to interfere with the aforesaidjudgment of Bombay High Court, but issued certain directions. Mr. Anil Mehta, learned counsel for the respondentsopposed the writ petitions and argued that applications of thepetitioners have rightly been held to have abated because theSettlement Commission was not able to decide the applicationswithin six months as directed by Division Bench of this Court. It isargued that as per Section 245HA(2) of the Act, where aproceeding before the Settlement Commission abates, theAssessing Officer or as the case may be, any other income taxauthority before whom the proceeding at the time of making theapplication was pending, shall dispose off the case in accordancewith the provisions of the Act as if no application under Section245C has been made. In the present writ petitions, thepetitioners have not challenged the provisions of Section245HA(iv) of the Act, therefore, writ petitions are notmaintainable. The petitioners could have filed applications forreview or recalling of order dated 19.12.2016 before theSettlement Commission itself. Learned counsel relied upon the judgment of MadhyaPradesh High Court at Gwalior Bench in Preeti Goyal Vs. Unionof India & Others(Writ Petition No. 5529/2010 decided on25.09.2014) and argued that in that case, Madhya Pradesh HighCourt relied on the judgment of the Supreme Court in HopeTextiles Limited Vs. Union of India, (1995) Suppl. 3 SCC 199 and held that a direction cannot be issued by the Court to astatutory authority to act contrary to statutory provision and theassessing officer is bound to complete the assessment orreassessment within the prescribed statutory limit. In that case,the application for settlement under Section 245C was filed on28.05.2007 and according to sub section 4A of Section 245D ofthe Act, the specified date would be 31.03.2008 and if the periodfrom 28.05.2007 to 31.03.2008 be excluded, which comes to 10months and 3 days, then the assessment has to be completed upto 31.10.2009. It was held that the revenue had no power andauthority to continue the assessment proceeding beyond thestatutory period of limitation. It is argued that this issue was also dealt with by theGujarat High Court in Acron Pharmaceuticals Vs. Union ofIndia(Special Civil Application No. 2694/2012 decided on29.08.2013). In that case, the Gujarat High Court alsoconsidered the judgment of the Bombay High Court in StarTelevision News Limited(supra) and held that it is required tobe noted that as per the settled proposition of law, the provisionof law is required to be read down either to uphold itsconstitutionality and so as to achieve the object and purposeand/or when there is some ambiguity in the provision. In thefacts of that case it was further observed by the Gujarat HighCourt that Section 32F(6) of the Act to the extent it providesabatement of the proceedings in case the Settlement Commissiondoes not pass final order within the time prescribed in the said provision is a complete code with all necessary safeguards and toachieve the object and purpose of speedy disposal of cases andspeedy recovery of duties, which is held to be neitherunreasonable nor arbitrary and/or violative of Article 14 of theConstitution of India. There is no need to further read down thesaid provision. provision is a complete code with all necessary safeguards and toachieve the object and purpose of speedy disposal of cases andspeedy recovery of duties, which is held to be neitherunreasonable nor arbitrary and/or violative of Article 14 of theConstitution of India. There is no need to further read down thesaid provision. Learned counsel also relied upon the judgment ofKarnataka High Court in RNS Infrastructure Limited Vs.Income Tax Settlement Commissioner & Others(WritPetition No. 46275-46289 of 2016 decided on 07.12.2016)wherein the Settlement Commission had passed order on27.05.2016. It was contended that the High Court had grantedinterim stay order in the writ petition filed by the Revenue videorder dated 29.04.2015 which remained in operation till03.12.2015. Writ petition was dismissed vide order dated18.01.2016. The petitioner therein sought exclusion of the periodof stay in writ petition before the Settlement Commission whilecomputing the limitation provided under Section 245D(4A)(iii) ofthe Act and contended that time limit gets extended by31.12.2016. However, the Settlement Commission arrived at theconclusion that time limit would be up to June, 2016 and passedfinal order on 27.05.2016 quantifying the tax liability of thepetitioner therein taking into consideration the seized material,statements recorded during the course of search and also byexamination of various physical evidences from hard discs andother material. The Karnataka High Court distinguished the judgment of Bombay High Court inStar TelevisionLimited(supra) holding that the same is not applicable to thefacts of that case. I have given my anxious consideration to rivalsubmissions and perused the material on record. In the present cases, writ petitions have been ledbefore Single Bench because the validity of provisions of Sections245D(4A) and 245HA of the Act have not been challenged andwrit petitions have been filed seeking extension of time fixed byDivision Bench of this Court while relying upon the judgment ofthe Supreme Court in Union of India Vs. Star Television NewsLimited(supra) wherein judgment of the Bombay High Court inStar Television News Limited(supra) was upheld. Despite citing of judgments of High Courts ofKarnataka, Madhya Pradesh and Gujarat by learned counsel forthe respondents, the core issue which remains to be decided inthe present writ petitions is not that whether the time limit fordeciding settlement application can be extended or not. That issuestands decided when matters were earlier laid before the DivisionBench of this Court because at that time the petitioners alsochallenged the constitutional validity of provisions of Sections245D(4A) and 245HA of the Act. The Division Bench of this Court,without going into the constitutional validity of the aforesaidprovisions, but relying upon the judgment of the Supreme Courtin Union of India Vs. Star Television News Limited(supra)remitted the matters back to the Settlement Commission to consider the issue of delay and if it found that delay was notattributable to the applicant, to complete the proceedings withinsix months. Out of that period of six months, period of twomonths and five days was lost because the original records ofthese matters could not be traced and eventually it had to bereconstructed under the order of the Chairman of the SettlementCommission. Even for the remainder period of four months, caseof the petitioners is that they are not to be blamed completely.Division Bench of this Court rendered the judgment on25.04.2016 in the presence of learned counsel for the assessee aswell as revenue. Settlement Commission has noted that thepetitioners claimed to have deposited copy of the aforesaidjudgment of Division Bench of this Court with the Principal Seat ofthe Settlement Commission at New Delhi with letter dated27.06.2016 and thereafter, the petitioners vide another letterdated 29.06.2016 made request to fix the cases urgently in viewof the time fixed by this Court. Subsequently, the petitionersclaim to have personally handed over copies of the letter to theSecretary, Additional Bench II, New Delhi. Accordingly, a letterdated 05.07.2016 was written to the Secretary, Principal Bench,New Delhi to transfer these two cases to that Bench. TheAdditional Bench-II received the matters with the letter of thePrincipal Bench dated 19.08.2016. It is, thereafter, that attempts were made toreconstruct the records in these cases with the help of thepetitioners and the concerned Pr. CIT at Jaipur. Reports required under Rule 9 were called vide letter dated 02.09.2016 latest by15.09.2016 from Pr. CIT(Central) Jaipur. The reports werereceived vide letter dated 14.09.2016, which were duly forwardedto the petitioners vide letter dated 15.09.2016 with request tosubmit comments on the report by 07.10.2016. Notice of hearingdated 16.09.2016 was sent to the petitioners by fixing 02.11.2016as the date for hearing. Letter dated 07.10.2016 was receivedfrom the petitioners requesting for extension of ten days time tofurnish comments on Rule 9 report. Letter dated 07.10.2016 wasaddressed to the petitioners extending time up to 17.10.2016 forsubmission of comments on Rule 9 report, which was receivedfrom the petitioner vide letter dated 12.10.2016. Thesecomments were forwarded to Pr. CIT(C), Jaipur vide letter dated17.10.2016 for submitting counter comments by 28.10.2016,which were forwarded to the petitioners vide letter dated28.10.2016. The petitioners were asked to offer further commentsif they wished to do so and to appear for a hearing on02.11.2016. When the hearing took place on 02.11.2016, ittranspired that some more documents were required to befurnished in both the cases on the basis of which verificationswere to be carried by the AO to arrive at final conclusion on theissues. The matters were adjourned to 28.11.2016 with directionto the petitioners to furnish the required documents to theDepartment before that date so that Pr. CIT could be ready withcounter comments. The petitioners then vide letter dated25.11.2016 sought extension of time on the ground that there was bereavement in the family of the briefing counsel at Kota andhe was in a state of mourning. Final opportunity was given to thepetitioners to submit comments and appear for hearing on09.12.2016 vide letter dated 25.11.2016. Pr. CIT also gave itscomments vide letter dated 25.11.2016 which were received bythe Settlement Commission on 28.11.2016 and they wereforwarded to the petitioners on 29.11.2016 for counter commentsbefore the date of hearing, i.e. 09.12.2016. It is in the context ofabove factual matrix that the Settlement Commission in its orderdated 19.12.2016 noted that since copy of order passed byDivision Bench of this Court was served at Principal Bench at NewDelhi on 27.06.2016, limitation for passing the order underSection 245D(4) of the Act would expire on 27.12.2016. Aftergetting the Principal Bench’s advice on 19.08.2016, earnestattempts were made to reconstruct the files as the matters werevery old and records were not readily available with the PrincipalBench and thereafter to get comments of both the petitioners andthe department. However, the petitioners have delayed sendingtheir comments/counter comments repeatedly. Extension of timefor appearance during hearing was also sought, knowing well thatthe time limit, fixed by Division Bench of this Court wasapproaching near. Final comments were ultimately furnished bythe petitioners on 09.12.2016, just before the limitation date.The department has legitimately sought time to examine thepetitioners’ comments and contentions, which cannot be grantedin view of the limitation that is expiring on 27.12.2016. The Settlement Commission therefore, squarely blamed the petitionersfor the delayed responses and repeated requests foradjournments, which impeded the process of finalization of thematters. However, the Settlement Commission also noted that Pr.CIT has also sought a period of one and a half months to carry outthe required verification and observed that this request of thedepartment could not be brushed aside because in view of theprinciples of natural justice, due opportunity needs to be given toboth the parties. Therefore, the Settlement Commission held thateven though period of six months fixed by this Court was expiringon 27.12.2016, it was not possible for it to conclude theproceedings by that date and therefore, proceedings in the casesshould be taken to have abated. If 27.12.2016, as per computation made by theSettlement Commission, was the date up to which proceedingswere to be concluded, there was no occasion for the SettlementCommission to declare the proceedings to have abated one weekbefore that date, i.e. on 19.12.2016, the date on which impugnedorder was passed. Besides, the facts as noted hereinabove wouldshow that though the petitioners to some extent were alsoresponsible for the delay caused in completion of the proceedings,but it cannot be said that the petitioners alone were guilty ofcausing such delay because the department was also contributoryin prolonging the proceedings for one reason or the other,particularly when it demanded a period of one and a half months, whereas already a week’s time was left before period of sixmonths fixed by Division Bench of this Court would have expired. whereas already a week’s time was left before period of sixmonths fixed by Division Bench of this Court would have expired. Therefore, this Court is of the opinion that ends ofjustice would be met, if the time to conclude the aforesaidproceedings is extended by further three months from today withdirection to the parties to produce copy of this order before theSettlement Commission within a period of one week with clearstipulation that the Settlement Commission shall take up theproceedings, if not possible on day to day basis and if not, then onweekly basis and shall not grant undue adjournment to either ofthe parties and if adjournment is granted then it should be for amaximum period of seven days at one go and the SettlementCommission shall conclude its proceedings within a period of twomonths and utilize remaining period of three weeks to finalise andframe its final order. In the result, the writ petitions are allowed. Theimpugned order dated 19.12.2016 is set aside. The matter isremitted back to the Settlement Commission for deciding it afreshin accordance with the aforementioned directions. Stay applications stand disposed off. Office is directed to place a copy of this order on recordof connected writ petition. (MOHAMMAD RAFIQ)J.