'Cut-off date for resolving I-T issues arbitrary'

MUMBAI: The Bombay High Court on Friday ruled that the cut-off date for resolving matters of tax evasion and complex tax transactions before the Settlement Commission was arbitrary.

About 500 applicants had moved the court challenging the provision of the Finance Act 2007. According to the provision, the Commission had to resolve matters that were pending till July 1, 2007, by March 31, 2008.

The Income-Tax Act had the provision for settling cases, where the applicants approached the Commission for a speedy resolution. The Commission also had the power to grant immunity from prosecution and penalty to such applicants.

Earlier, there was no time limit for the Commission to resolve such issues. The Finance Act, 2007, however, imposed a deadline for issues to be resolved failing which the pending cases would become redundant. In such a situation, applicants would have to go back to the assessing officer and resolve the case.

For assessees, this would imply that confidential information brought on record for settling the matter would then be available to such an officer.

Aggrieved with the provision, applicants such as Star Group, Birla Capital & Finances had moved the high court against the provision. Their counsel, Iqbal Chhagla, said the Commission did not proceed with the litigation for no-fault of the assessees.

I-T counsel Beni Chatterji submitted that the deadline had been brought into effect to streamline the proceedings before the Commission.

The division bench of Justice FI Rebeillo and Justice JH Bhatia said confidential information cannot be made available to the I-T authorities. The court held that it would not "punish an applicant for inability of the Settlement Commission to fulfill its statutory obligation for matters beyond the applicants control."

Except cases where the application could not be disposed for reasons attributable to the assessee, the Commission has to deal with the cases, the judges said.