Prior Cutoff Date Not Applicable u/s 245C Income Tax Act for Settlement Application: Kerala HC [Read Order]

The Kerala High Court stated that prior cut off date is not applicable under section 245C of the Income Tax Act for a settlement application.

The assessee, Aayana Charitable Trust, brought a challenge under the Income Tax Act, 1961, and was upset by the Interim Board for Settlement's decision to deny their requests to settle their cases in line with Chapter XIX-A of the Act.

Only after March 31, 2021, were notices citing Section 153A/Section 153C provisions sent to the assessee/respondent. The Interim Board for Settlement determined that their applications for settlement were not maintainable due to their failure to meet the requirements of having a "pending case" as defined by the Statute on or before 31.01.2021, in accordance with the statutory provisions mentioned above and the CBDT order issued in accordance with Section 119(2)(b) of the I.T. Act.

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The Single Judge ruled that the deadline of March 31, 2021, should be considered in relation to the search proceedings that were started against the assessee. The issue of whether the applications for settlement before the Board could be maintained was unaffected by the fact that the notices under Sections 153A and 153C of the IT Act were issued later. The court was asked to decide whether an assessee who received notices under Sections 153A and 153C after March 31, 2021, but before September 30, 2021, could continue to submit applications to the Interim Board for Settlement for case settlement.

The revenue argued that there was no warrant for holding that a search proceeding under Section 132 of the I.T. Act could also be viewed as an initiation of proceedings for the purposes of Chapter XIX-A of the I.T. Act when the express provisions of the I.T. Act defined a pending case with reference to the period between the initiation of proceedings and the culmination of those proceedings, and the initiation of proceedings was tied to the date of issuance of a notice under Sections 153A/153C, as the case may be.

A division bench of Justices A.K. Jayasankaran Nambiar and P.M. Manoj observed that the only statutory requirement for filing an application before the Interim Board for Settlement is that the assessee must have a pending "case" at the time of filing the application. In cases where Section 245C does not specify a deadline, the application must be evaluated on its merits by the Board as long as the assessee had a "live and un-adjudicated" notice under Sections 153A/153C on the date of filing.

The bench ruled that the CBDT ruling, which was issued under Section 119(2)(b) with the intention of loosening the strictures of a legislative provision, could not have denied a class of assessee the benefit of an extension while only extending the time limit for making an application. Insofar as the bench believes that search procedures under Section 132 would also be considered a "case" pertaining to the respondent/assessee for the purposes of Chapter XIX-A of the IT Act, it overturned the Single Judge's decision.

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