Can’t punish applicants for delay by settlement commission: HC

Bringing relief to several applicants whose pleas are pending before the settlement commission of the Income-Tax Department, the Bombay High Court on Friday held that applicants cannot be punished for a delay caused in hearing owing to their pending before the commission.

In petitions filed by nearly 500 applicants including Star Television, Channel V Music Networks, Asia Broadcasting, Ajmera Builders and Zenith Steel Tubes, the court held that the March 31, 2008 deadline for the commission to dispose of applications filed prior to June 1, 2007, was arbitrarily arrived at.As a result, the time limit set under the Income-Tax Act pursuant to the amendment in the Finance Act, 2007 was also held to be arbitrary.

The decision translates into reprieve for individuals and companies, who will not have to disclose confidential information to the I-T department if their cases are not decided within the stipulated time.

The applicants had moved the high court stating that the commission could not decide their applications within the given March 31, 2008 deadline as they had a heavy number of applications pending.

As a result, their applications would be abated and the I-T department would then be privy to the confidential information (pertaining to their assets, revenue and taxability) submitted by the applicants to the settlement commission.

Counsel for the central government and the I-T department Beni Chatterji had told the court that the cut-off date was introduced in the Act for streamlining the proceedings before the settlement commission and to avoid delays in assessing tax liabilities.

However, as per the statistics submitted to the court, of 3090 cases more than six years old, 1,175 were pending before the commission as of March 31, 2008.

Justice F I Rebello and Justice J H Bhatia observed that confidential information of applicants cannot be disclosed to I-T authorities on such a “fortuitous circumstance”.
The court said it was not right to “punish an applicant for inability of the settlement commission to fulfill its statutory obligation for matters beyond the applicants’ control.”

The court directed the commission to abate only those applications where delay was caused by the applicant and continue to hear the rest. It suggested that the Centre may consider setting up on more benches of the settlement commission, more so, in places like Mumbai and Delhi that have heavy number of pending applications.