PANKAJ JAIN V. INCOME TAX SETTLEMENT COMM andOR

CW/8867/2008

AI Insights

The case involves multiple petitioners, including Pankaj Jain, Shri Padam Chand Jain, and Pravin Kumar Jain, who challenged the orders and notices issued by the Income Tax authorities following a search operation under section 132 of the Income Tax Act, 1961. The petitioners contested the appointment of a special auditor and the provisions of section 245HA introduced by the Finance Act, 2007, which they argued were unconstitutional. The Supreme Court's decision in Union of India vs. Star Television News Ltd. was pivotal, influencing the High Court's decision to quash the contested orders and notices.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 750964 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 26-04-2017
• Assessment Year: misc
• Other Referred Cases: Union of India vs. Star Television News Ltd. [2015] 373 ITR 528 (SC)
• Laws Referred To: Income Tax Act, 1961, Finance Act, 2007
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ADITYA VIJAY
• Assessee Lawyers: ANANT KASLIWAL
• Keywords: Block assessment; Income Tax; Quashing of order; Settlement commission; Special Auditor; Undisclosed income
• Section: 142(1); 132; 142(2A); 158BC; 245C(1); 245HA

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 8867 / 2008 Pankaj Jain S/o Shri Padam Chand Jain, aged 33 years, resident of 266/30, Tikamganj, Ajmer. ----Petitioner Versus 1. Income Tax Settlement Commission, 4th Floor, Lok Nayak Bhawan, Khan Market, New Delhi-110003. 2. Deputy Commissioner of Income Tax, (Central), Income Tax, Central Revenue Building, Ajmer. 3. Union of India through Secretary, Ministry of Finance, Government of India, North Block, Department of Revenue, New Delhi. ----Respondents Connected With D.B. Civil Writ Petition No. 8865 / 2008 Shri Padam Chand Jain S/o Late Shri Vasudeo Prasad Jain aged 60 years, Proprietor M/s Parasnath Industries, 266/30, Tikamganj, Ajmer. ----Petitioner Versus 1. Income Tax Settlement Commission, 4th Floor, Lok Nayak Bhawan, Khan Market, New Delhi-110003. 2. Deputy Commissioner of Income Tax, (Central), Income Tax, Central Revenue Building, Ajmer. 3. Union of India through Secretary, Ministry of Finance, Government of India, North Block, Department of Revenue, New Delhi. ----Respondents D.B. Civil Writ Petition No. 8866 / 2008 Pravin Kumar Jain S/o shri Padam Chand Jain aged 38 years, resident of 266/30, Tikamganj, Ajmer. ----Petitioner Versus (2 of 6) [CW-8867/2008] 1. Income Tax Settlement Commission, 4th Floor, Lok Nayak Bhawan, Khan Market, New Delhi-110003. 2. Deputy Commissioner of Income Tax, (Central), Income Tax, Central Revenue Building, Ajmer. 3. Union of India through Secretary, Ministry of Finance, Government of India, North Block, Department of Revenue, New Delhi. ----Respondents _____________________________________________________ For Petitioner(s) : Mr. Anant Kasliwal For Respondent(s) : Mr. Aditya Vijay on behalf of Mr. Anuroop Singhi _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment Per Hon’ble Jhaveri, J. 26/04/2017 1. By way of these writ petitions, the petitioners have prayed for following reliefs: “1. By quashing the order dated 09.08.2002 (Annexure-2), and notices for attending the proceedings (Annexure 7, 8 & 9) issued by the Assessing Authority may kindly be quashed and set aside. 2. By quashing and declaring provisions of section 245HA inserted by the Finance Act, 2007 being the illegal and ultra vires of the Constitution of India.” 2. The facts of the case are that on 09.08.2000 a search operation under section 132 of the Income Tax Act, 1961 was carried out at the business and residential premises of the petitioners where from cash, shares, stocks 7 loose papers were (3 of 6) [CW-8867/2008] seized. Notice u/s 158BC was issued to the petitioners for block assessment in respect of alleged undisclosed income on 9.2.2001. On 28.02.2001 the petitioners requested respondent No.2 for providing copy of seized record and statement recorded. On 5.7.2002 the Assessing Officer issued a questionnaire u/s 142(1) of the Act. The Assessing Officer without giving any opportunity of hearing to the petitioner passed an order dated 9.8.2002 whereby the petitioners were directed to get a special order to be conducted by an Auditor nominated by the Revenue in inters of Section 142(2)(A) of the Act. Petitioners submitted a representation dated 26.08.2002 whereby the he seriously disputed the appointment of special Auditor. The petitioners challenges the order of the Assessing Authority in the year 20012 for appointment of special Auditor before his Hon’ble Court by way of SB Civil Writ Petition No.8170/02, 8174/02 & 8176/02. In the said writ petitioners, this Hon’ble Court was pleased to grant respective ad-interim orders restraining the operation of order u/s 142(2A) of the Act. The petitioner have filed an application u/s 245C(1) of the Act on 17.10.2005 in terms of Scheme of Settlement of case contained in Chaptr-XIX. On 27.07.2007 the petitioners deposited a sum of Rs.2,29,500/- with a view to comply with the amended provisions of the Income Tax Act whereby the petitioners were required to make a pre-deposit of the entire amount of tax liability accruing. By the introduction of Finance Act, 2007 a new section 245HA was added whereby it was enacted that all the proceedings which are complex in nature and (4 of 6) [CW-8867/2008] pending before the Income Tax Settlement Commissioner shall abate if the same are not decided on or before 31st March-2008. On 5.03.2008 the petitioners withdrew its writ petition pending before the Hon’ble Court with a liberty to file a fresh one. On 15.07.2008 the respondent No.2 issued a impugned letter/order requiring the petitioner to comply with the order dated 09.08.2000 passed u/s 142(2) and to get the books of accounts audited by the said nominated Auditor, M/s Ajay Somani & Co. By the same letter, the respondent no.1 also intimated to the petitioners that as its application filed under section 245C(1) as abated it must now start attending the assessment proceedings pending before it and which were in suspension due to the pendency of the Settlement Commissioner. Further the respondent no.2 also issued consequential impugned notices u/s 142(1) and 143(2) of even date. 3. Counsel for the petitioners has relied upon the decision of Supreme Court in the case of Union of India vs. Star Television News Ltd. [2015] 373 ITR 528 (SC) and more particularly which has been held as under: “1. Delay condoned. 2. In all these special leave petitions filed by the Union of India, the correctness of judgment dated 07.08.2009 rendered by the Bombay High Court in a batch of writ petitions is questioned. 3. In those writ petitions filed by various Assessees, the validity of Sections 245HA(1)(iv) and 245HA(3) of the Income Tax Act, 1961, as amended by Finance Act, 2007 was challenged. The High Court, by a detailed judgment, found the aforesaid provisions to be violative of Article (5 of 6) [CW-8867/2008] 14 etc but at the same time, it did not invalidate these petitions as the High Court was of the opinion that it was possible to read down the provisions of Section 245HA(1)(iv) in particular to avoid holding the provisions as unconstitutional. The conclusion so arrived at is summed up in paragraph 54 of the impugned judgment, which reads as under: 54. From the above discussion having arrived at a conclusion that fixing the cutoff date as 31st March, 2008 was arbitrary the provisions of Section 245HA(1)(iv) to that extent will be also arbitrary. We have also held that it is possible to read down the provisions of Section 245HA(1)(iv) in the manner set out earlier. This recourse has been taken in order to avoid hold in the provisions as unconstitutional. Having so read, we would have to read Section 245HA(1)(iv) to mean that in the event the application could not be disposed of for any reasons attributable on the part of the applicant who has made an application Under Section 245C. Consequently only such proceedings would abate Under Section 245HA(1)(iv). Considering the above, the Settlement Commissioner to consider whether the proceedings had been delayed on account of any reasons attributable on the part of the Applicant. If it comes to the conclusion that it was not so, then to proceed with the application as if not abated. Respondent No. 1 if desirous of early disposal of the pending applications, to consider the appointment of more Benches of the Settlement Commission, more so as the Benches where there is heavy pendency like Delhi and Mumbai. 4. We are of the opinion that it is a well- considered judgment of the High Court and does not call for any interference. 5. All these special leave petitions are accordingly dismissed.” 4. Counsel for the respondents is not in a position to dispute the same. (6 of 6) [CW-8867/2008] 5. In view of the above decision of the Supreme Court, the prayers which are claimed by the petitioners are to be granted. The order dated 09.08.2002 and notices (Annexure-7, 8 & 9) pursuant to the said order are quashed. The matter will go back to the Settlement Commissioner for decision in accordance with law. 6. The writ petitions stand disposed of. 7. A copy of this judgment be placed in each file. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Asheesh Kr. Yadav/45-47 "