 mandatory and quashes a time-barred Interim Board settlement order in B.L. Agro.){kind=link}
Case: M/s B.L. Agro Industries Limited, Bareilly Through Mr. Amit Kumar, Authorised Signatory v. Union of India, Ministry of Finance, Department of Revenue & Others
Court: High Court of Judicature at Allahabad, Lucknow
Case No.: Writ Tax No. 77 of 2024 with connected petitions
Reserved On: 7 July 2026
Delivered On: 10 August 2026
Coram: Hon’ble Shekhar B. Saraf, J. and Hon’ble Abdhesh Kumar Chaudhary, J.
The Allahabad High Court has held that the 18-month time limit prescribed under Section 245D(4A)(iii) of the Income Tax Act, 1961 for disposal of a settlement application is mandatory, and that the limitation period cannot restart merely because a pending settlement application is subsequently transferred from one Interim Board for Settlement to another.
The controversy arose from settlement proceedings initiated by M/s B.L. Agro Industries Limited following search and seizure proceedings under Section 132. Pursuant to an earlier order of the High Court, the petitioner filed its settlement application on 23 March 2021. The application was subsequently treated as a “pending application” under Chapter XIX-A and came before the Interim Board for Settlement following abolition of the Income Tax Settlement Commission.
The application was initially allotted to IBS-III, Delhi, which on 7 March 2022 exercised powers under Section 245D(3) and called for a Rule 9 report. Thereafter, by CBDT order dated 13 June 2022, the pending application was administratively transferred from IBS-III, Delhi to IBS-VII, Chennai. IBS-VII ultimately rejected the settlement application by an order dated 30 October 2023, while subsequent rectification applications were rejected on 15 December 2023.
Core Issue: When Does the 18-Month Limitation Begin?
The principal issue before the High Court was whether the statutory period of 18 months under Section 245D(4A)(iii), read with Sections 245D(9)(iii) and 245M(2), commenced when the application was first allotted to IBS-III, Delhi or whether a fresh limitation period commenced when it was later transferred to IBS-VII, Chennai.
The Revenue contended that the deemed date of receipt should be 13 June 2022, when the case was transferred to IBS-VII, Chennai. On that basis, it argued that the order dated 30 October 2023 was within limitation.
The High Court rejected this interpretation.
According to the Court, once the application had already been allotted to IBS-III, Delhi and that Board had exercised jurisdiction by calling for the Rule 9 report under Section 245D(3), the statutory limitation had already begun to operate. A later administrative transfer between Interim Boards could not give the authorities a fresh period of 18 months.
Transfer Between Interim Boards Cannot Extend Limitation
The Court found that accepting the Revenue’s interpretation would effectively permit the statutory limitation period to be extended whenever a matter was transferred from one Interim Board to another.
The Court held that such an interpretation was unsustainable. The period prescribed under Section 245D(4A)(iii) cannot be extended once the Interim Board takes cognizance of the pending settlement application.
The fact that IBS-III, Delhi had called for a Rule 9 report was significant because, under the e-Settlement Scheme, 2021, such action could be taken only after the matter had already been allotted or transferred to the Interim Board. Therefore, the subsequent transfer to IBS-VII, Chennai represented a continuation of the proceedings and not the commencement of a fresh statutory period.
18-Month Period Is Mandatory, Not Directory
On the nature of the limitation prescribed under Section 245D(4A), the High Court relied upon the decision in R.N.S. Infrastructure Ltd., which had been affirmed by the Karnataka High Court Division Bench and in respect of which the Supreme Court had dismissed the Special Leave Petition.
The Court held that the statutory period of 18 months is mandatory and that an order passed beyond the prescribed period is time-barred and a nullity.
It also distinguished the decision in Star Television News Ltd. v. Union of India, observing that the case concerned a different statutory situation relating to abatement and arose before the Finance Act, 2010 introduced the relevant 18-month period.
Verdict
The Allahabad High Court concluded that the order passed by IBS-VII, Chennai was beyond the statutory period prescribed under Section 245D(4A)(iii), read with Sections 245D(9)(iii) and 245M(2).
The Court held that the limitation period commenced when the petitioner’s application first stood allotted to and was acted upon by IBS-III, Delhi, and not from the subsequent administrative transfer to IBS-VII, Chennai.
Accordingly, the Court quashed the order dated 30 October 2023 passed under Section 245D(4) and the consequential order dated 15 December 2023 passed on the rectification applications, and allowed the writ petitions.
Important Clarification by the Court
The judgment is confined to the question of limitation governing disposal of the settlement application. The High Court expressly clarified that it had not decided whether the settlement proceedings would abate or the consequences flowing from such abatement.
It further clarified that, since those questions were left undecided, principles of res judicata or constructive res judicata would not apply to those issues.
Key Takeaway
The judgment establishes an important principle for pending settlement applications transitioned to the Interim Board regime after abolition of the Income Tax Settlement Commission: a subsequent administrative transfer from one Interim Board to another does not restart the statutory 18-month period under Section 245D(4A).
Once an Interim Board has been allotted the settlement application and has acted upon it, the limitation continues to run. Administrative reallocation cannot be used to enlarge a statutory deadline that is mandatory in nature.