The Allahabad High Court has held that the 18-month period prescribed under Section 245D(3) the Income Tax Act for deciding a settlement application is mandatory and cannot be extended merely because the application is transferred from one Interim Board for Settlement to another.
A Division Bench of Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary allowed a writ petition filed by M/s B.L. Agro Industries Limited, holding that the Interim Board for Settlement, Chennai, passed its order beyond the statutory limitation period.
Background of the Case
The case arose from a search and seizure conducted at the premises of B.L. Agro Industries Limited on October 4, 2018. Following the search, income-tax proceedings were initiated for several assessment years.
The company later sought settlement of the proceedings. Since the Income Tax Settlement Commission had been abolished by the Finance Act, 2021, the company approached the Allahabad High Court. On March 19, 2021, the Court permitted it to file a settlement application, which was submitted on March 23, 2021.
The application was subsequently treated as a “pending application” and allotted to the Interim Board for Settlement at Delhi. On March 7, 2022, the Delhi Board exercised powers under Section 245D(3) and called for a Rule 9 report.
The application was later administratively transferred to the Interim Board at Chennai on June 13, 2022. The Chennai Board rejected the settlement application by an order dated October 30, 2023. A subsequent rectification application was also dismissed on December 15, 2023.
The petitioner challenged both orders, primarily arguing that the statutory 18-month period had already expired.
Court's Observation
The High Court examined Sections 245D, 245M and 245HA of the Income Tax Act along with the e-Settlement Scheme, 2021.
The Bench found that the application had already been allotted to the Delhi Interim Board before its subsequent transfer to Chennai. The Delhi Board had also acted upon the application by directing the authorities to furnish the Rule 9 report.
The Court rejected the Revenue's argument that a fresh 18-month period would begin when the application was transferred to the Chennai Board.
The Bench observed that such an interpretation could effectively extend the statutory period every time an application was transferred between Interim Boards. The Court held that the limitation period “cannot be extended once the Interim Board takes cognizance” of the pending application.
The Court also relied on the Supreme Court's dismissal of the challenge arising from R.N.S. Infrastructure Ltd., observing that the 18-month period under Section 245D(4A) is mandatory.
Decision
The Court concluded that the 18-month period had commenced when the application was first allotted to and acted upon by the Interim Board at Delhi.
Since the Chennai Board passed its order on October 30, 2023, beyond the prescribed period, the order was held to be time-barred.
Accordingly, the Allahabad High Court quashed and set aside the October 30, 2023 order passed by IBS-VII, Chennai, along with the consequential order dated December 15, 2023, and allowed the writ petition.
The Court clarified that it had confined its decision to the issue of limitation and had not examined whether the settlement proceedings abated or the consequences of such abatement.
Case Details:
Case Title: M/s B.L. Agro Industries Limited v. Union of India Ministry of Finance Department of Revenue & Others
Case Number: Writ Tax No. 77 of 2024
Judge: Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary
Decision Date: August 10, 2026
