Settlement of cases : Abatement : Ss. 2(45), 245C and 245D(2A) & (2D) of I. T. Act, 1961 : Tax on total income means tax on total income after set-off of carried forward loss : Assessee paid tax correctly : No abatement u/s.245D(2) : Application to be pro

[Govind Builders and Developers vs. ITSC : 309 ITR
167 (Bom)].

On 14.09.2006, the assessee made an application to the
Settlement Commission u/s. 245C of the Income-tax Act, 1961 for settlement of
its case for the A. Y. 2004-05. The returned income for that year was a loss
of Rs. 93,112. The assessee had offered an additional income of Rs.53,57,375
in the settlement application. The assessee was also entitled to carried
forward loss of Rs.93,193 of the A. Y. 2003-04. For the purpose of tax payable
u/s. 245D(2A) the assessee arrived at the aggregate total income of
Rs.51,70,820 after reducing from Rs.53,57,375 the returned loss of Rs.93,112
for the relevant year and the carried forward loss of Rs.93,193 of the A. Y.
2003-04. Accordingly it computed the additional tax payable at Rs.18,55,032
and paid Rs.25,59,932 together with interest on 26.05.2007. This payment was
made in compliance with the provisions of Section 245D(2A) of the Act wherein
the last date for payment was 31.07.2007. The Settlement Commission held that
the carried forward loss was wrongly set off and accordingly there was no
compliance of the provisions of Section 245D(2A) of the Act and therefore
declared that the proceedings abated in accordance with the provisions of
Section 245D(2D) of the Act. On 13.11.2007 the assessee paid the difference as
per the decision of the Settlement Commission.

On a writ petition filed by the assessee challenging the
decision of the Settlement Commission, the Bombay High Court held as under :

“i) Section 245D(2A) is mandatory and the additional tax
had to be paid on or before 31.07.2007. The Commission could not condone the
delay or accept the additional amount after 31.07.2007, as the application
itself would stand rejected by operation of law. Once there was no power
with the Commission itself, it was not possible for the Court to act under
the extraordinary jurisdiction under Article 226 read with Article 227 of
the Constitution of India also.

ii) The Settlement Commission, while considering whether
the tax has been paid as contemplated by Section 245D(2A), has to examine
whether that tax is on the total income as disclosed. The tax payable would
be on the income as set out in Section 2(45) of the Act. The assessee was
entitled to carry forward the loss of Rs.92,370. Therefore, the assessee had
correctly paid the tax. Since the assessee could carry forward the loss of
the preceding assessment year, the finding of the Commission that the tax
was not paid was an error of law apparent on the face of the record.
Therefore the finding that the application has abated had to be set aside
and the application had to be proceeded with.”