Court Declares Order Non Est in Law as It Exceeded the 18-Month Limitation Period Under Section 245D(4A)(iii) of the Income Tax Act
In a significant ruling, the Allahabad High Court has quashed the orders passed by the Interim Board for Settlement-VII, Chennai, concerning the settlement application of B.L. Agro Industries Limited. The Court found that the statutory period of 18 months for disposing of the settlement application, as mandated under Section 245D(4A)(iii) of the Income Tax Act, 1961, had been exceeded, rendering the order non est in law.
The case arose when B.L. Agro Industries Limited, after a search and seizure operation in 2018, filed a settlement application with the Income Tax Settlement Commission. However, with the abolishment of the Commission in 2021, the application was transferred to the Interim Board for Settlement as a pending application. The crux of the dispute was the commencement date of the 18-month limitation period, which the Court clarified begins when an application is first allotted to an Interim Board, not when it is subsequently transferred.
The Court, comprising Justices Shekhar B. Saraf and Abdhesh Kumar Chaudhary, emphasized that the limitation period is mandatory, not directory. The judgment noted that any order passed beyond this period is time-barred and non est in law. Consequently, the orders dated October 30, 2023, and December 15, 2023, by the Interim Board were quashed.
This ruling underscores the importance of adhering to statutory timelines in settlement proceedings, providing clarity on the interpretation of limitation periods under the Income Tax Act.
Bottom Line :
Income Tax Settlement - The statutory period of 18 months prescribed under Section 245D(4A)(iii) of the Income Tax Act, 1961 for passing an order on a settlement application is mandatory in nature. The period commences from the date the application is first allotted to an Interim Board for Settlement and not from the date of subsequent administrative transfer. An order passed beyond this period is time-barred and non est in law.
Statutory provision(s): Section 245D(4A)(iii), Section 245D(9)(iii), Section 245M(2), Section 245HA of the Income Tax Act, 1961.
B.L. Agro Industries Ltd. v. Union of India, (Allahabad)(DB)(Lucknow) : Law Finder Doc id # 2959314
