Settlement applications filed prior to 31-03-2021 deemed pending; retrospective bar u/s 245C(5) read down
Issue
Whether applications for settlement filed by assessees between 01-02-2021 and 31-03-2021 are valid and eligible for consideration by the Interim Board, despite the retrospective amendment to Section 245C(5) by the Finance Act, 2021, which prohibited filing applications on or after 01-02-2021.
Facts
Applications Filed: The assessees filed applications for settlement under Section 245C(1) for Assessment Years 2010-11 to 2020-21. These applications were filed after 01-02-2021 but before 31-03-2021.
Legal Amendment: The Finance Act, 2021 (notified w.e.f. 01-04-2021) abolished the Settlement Commission and inserted Section 245C(5), which retrospectively provided that no application shall be made on or after 01-02-2021.
Rejection: The Interim Board for Settlement rejected the applications, holding them invalid because they were filed after the retrospective cut-off date of 01-02-2021.
Administrative Extension: The CBDT had issued a notification extending the date for filing applications to 30-09-2021, but restricted eligibility only to those who were eligible as of 31-01-2021.
High Court’s View: The High Court held that the retrospective amendment could not take away the vested right of the assessees to approach the Settlement Commission when the statute (prior to the President’s assent to the Finance Act) legally allowed it. The Court “read down” the date in Section 245C(5) from 01-02-2021 to 31-03-2021.
Decision
Vested Rights Protected: The Supreme Court upheld the High Court’s finding that the Finance Act, 2021, despite being retrospective, cannot invalidate applications that were validly filed under the existing law before the Act received Presidential assent.
Section 245C(5) Read Down: The provision in Section 245C(5) barring applications after 01-02-2021 was read down. For all practical purposes, the cut-off date is treated as 31-03-2021.
Deemed Pending Applications: Applications filed between 01-02-2021 and 31-03-2021 are deemed to be “pending applications.” They are eligible for consideration by the Interim Board for Settlement.
SLP Dismissed: The Supreme Court found no ground to interfere with the High Court’s equitable interpretation and dismissed the Revenue’s Special Leave Petition (SLP).
Key Takeaways
Retrospective Limits: Retrospective tax amendments cannot extinguish procedural rights exercised by taxpayers during the interim period (between the Budget proposal and the enactment of the Finance Act) if the law at that time permitted the action.
Validity of Interim Applications: Any settlement application filed up to 31-03-2021 is legally valid and must be processed by the Interim Board, regardless of the 01-02-2021 cut-off mentioned in the statute.
Circular extension: The CBDT circulars/notifications extending timelines (e.g., dated 28-09-2021) must be interpreted in line with this judgment, effectively treating eligibility criteria as valid up to 31-03-2021.