The Allahabad High Court has held that the 18-month period prescribed under Section 245D(4A)(iii) of the Income Tax Act for disposal of settlement applications is mandatory, and cannot be extended by transferring a pending application from one Interim Board for Settlement to another.
A Division Bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary held that the limitation period begins when the application is first allotted to and acted upon by an Interim Board, and a subsequent administrative transfer cannot restart the statutory clock.
The Court was dealing with a settlement application filed in March 2021, which was allotted to IBS-III, Delhi under the e-Settlement Scheme, 2021. IBS-III subsequently directed the authorities to furnish a Rule 9 report under Section 245D(3). The application was later transferred to IBS-VII, Chennai by a CBDT order dated June 13, 2022.
Rejecting the Revenue’s contention that the 18-month period should commence afresh from the date of transfer, the Court observed that such an interpretation would permit the statutory period to be extended every time an application is transferred between Interim Boards.
Relying on R.N.S. Infrastructure Ltd., the Court reiterated that the 18-month period is mandatory and an order passed beyond that period is time-barred and a nullity.
The Court consequently held that the order dated October 30, 2023 passed by IBS-VII, Chennai was beyond the prescribed limitation period and quashed it along with the consequential order dated December 15, 2023.
The Bench clarified that it had confined its decision to the issue of limitation and had not examined the separate question of abatement or its consequences.
