Retrospective Legislation Can't Affect Vested Rights Of Assessee: Bombay High Court

The Bombay High Court has held that retrospective legislation cannot affect the vested rights of the assessee.

The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that when the Department has extended the last date from February 1, 2021, to September 30, 2021, it can only extend the deadline but cannot introduce a new concept of eligibility as of February 1, 2021, which is not in the Income Tax Act itself. Though the Central Board of Direct Taxes (CBDT) relaxed the rigors of the provisions of the Income Tax Act for the benefit of assessees, it is not open to the CBDT to put in new rigors or impediments to the rights of an assessee in a press release or a notification that are contrary to the provisions of the Income Tax Act.

The petitioner/assessee is in the business of manufacturing and trading in sugar, ethanol, power, etc. The assessee received a notice from the Assistant Commissioner of Income Tax, Central Circle 1(1), Pune, stating that a valid application for Assessment Years 2014–15 to 2020–21 has not been filed by the petitioner before the Settlement Commission.

This notice, along with a condition in a press release dated September 7, 2021, seeks to make only those assessees eligible to file an application before the Settlement Commission who were eligible as of January 31, 2021, which was challenged in the petition. Subsequently, upon leave being granted, the petition was amended to also impugn a notification dated September 28, 2021, in so far as it sought to make only those assessees eligible to file applications before the Interim Board Settlement Commission (IBSC), respondent, who are eligible as of January 31, 2021.

The assessee contended that the Settlement Commission having accepted the petitioner's application, in view of proviso to Section 245D(1), the application is deemed to have been proceeded with. No order has been passed by the Settlement Commission and/or the respondent treating the petitioner's application as invalid or dismissing or rejecting the petitioner's application. Since the petitioner's application is still pending before the Settlement Commission, the finding of the respondent in the notice to treat the application as not a valid application is bad in law.

The assessee argued the statutory remedy of approaching the Interim Board cannot be taken away retrospectively. Retrospective legislation cannot affect vested rights. When the Department has extended the last date from February 1,2021, to September 30, 2021, it can only extend the deadline but cannot introduce a new concept of “eligibility as ofFebruary 1, 2021,” which is not in the Act itself.

The department contended that the very purpose of the Finance Act, 2021, impugned

The legislation itself is to do away with the Settlement Commission and to set up an interim board to deal with the pending applications. The Finance Act received the assent of the Hon'ble President of India on March 28, 2021, was published in the gazette, and was notified on April 1, 2021. It was expressly given retrospective effect on February 1,2021. The petitioner does not have any vested right to settlement, and the settlement itself is a concession.

The court noted that when the Board itself feels that the date as prescribed in Section 245C(5) of the Act is required to be extended, there is no doubt that the provisions of Section 245C(5) are required to be read down. With respect to the notification, the question is not whether the notification goes beyond the provisions of the Act. If the notification goes beyond the provisions of the Act, then to that extent, the notification is clearly invalid and liable to be quashed. If, however, it is held that the notification does not impose a further condition that violates the provisions of the Act, then the date of eligibility in the said notification is required to be read down to save it from being quashed.

The court notification dated September 28, 2021, in so far as it seeks to make only those assessees eligible to file applications before the Settlement Commission who were eligible as of January 31, 2021, invalid.

Counsel For Petitioner: J.D. Mistri

Counsel For Respondent: Suresh Kumar

Case Title: Senapati Santaji Ghorpade Sugar Factory Versus Assistant Commissioner of Income Tax

Case No.: Writ Petition No.5862 Of 2021

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