Rajasthan High Court: CBDT's Eligibility Cut-Off of 31.01.2021 for Settlement Applications Is Ultra Vires – Vishnu Kumar Gupta Vs DCIT

Overview of the Dispute

The Rajasthan High Court, in a significant ruling dated 17.09.2026, allowed a batch of writ petitions filed by members of a real estate group who had approached the Interim Board for Settlement after a search action was conducted at their premises. The core issue before the Court was whether the Central Board of Direct Taxes, while extending the deadline for filing settlement applications under Section 119(2)(b) of the Income Tax Act, 1961, could simultaneously impose an additional eligibility condition requiring assessees to have been eligible as on 31.01.2021 — a date not found anywhere in Chapter XIX-A of the Act.

The Court answered in the negative, holding that such a condition was beyond the competence of the CBDT and could not be sustained in law.

Background Facts

The Search and Subsequent Notices

A search and survey operation under Section 132 and Section 133 of the Income Tax Act, 1961 was carried out at the business and residential premises of the petitioner group on 22.10.2019. Following the search, the Assessing Officer issued notices under Section 153A of the Act for Assessment Years 2012-13 to 2019-20, and a notice under Section 143(2) for Assessment Year 2020-21.

Importantly, these notices were not issued simultaneously. Notices for several assessment years were issued on or before 31.01.2021, while notices for the remaining years — including the Section 143(2) notice for Assessment Year 2020-21 — were issued only after 01.04.2021. The specific notice for Assessment Year 2020-21 was issued on 20.06.2021, a full 607 days after the search was conducted. No explanation for this delay was furnished by the Revenue in its counter affidavit.

The Finance Act, 2021 and Abolition of the Settlement Commission

In the intervening period, the Finance Act, 2021 abolished the Income Tax Settlement Commission. The Act received Presidential assent on 28.03.2021 and came into force from 01.04.2021. A proviso inserted in Section 245B declared that the Settlement Commission shall cease to operate on or after 01.02.2021. Additionally, sub-section (5) inserted in Section 245C provided that no application shall be made under that section on or after 01.02.2021 — a bar that operated approximately two months before the legislation itself came into existence.

Constitution of the Interim Board and CBDT's Extension Order

By a notification dated 10.08.2021, the Central Government constituted the Interim Board for Settlement under Section 245A. The CBDT then issued a Press Release dated 07.09.2021 and an Order dated 28.09.2021 bearing F. No. 299/22/2021-Dir(Inv.III)/174, exercising its power under Section 119(2)(b), extending the last date for filing settlement applications to 30.09.2021.

However, paragraph 4(i) of that Order confined the benefit of this extension exclusively to those assessees who were already eligible to file a settlement application as on 31.01.2021 — a condition that proved fatal to the petitioners whose notices were issued after that date.

Filing of Applications and Their Rejection

Acting on the extended deadline, all petitioners filed their settlement applications before the Interim Board on 28.09.2021, well within the extended period. By a common order dated 31.08.2023, the Interim Board took a divided position — it entertained applications for those assessment years where notices had been issued on or before the cut-off date, but rejected applications for the remaining years on the sole ground that no assessment proceeding was pending for those years as on 31.01.2021.

The following table, as reproduced from the judgment, captures the facts of each connected matter:

The Central Legal Question

The Court framed the question for determination as follows:

Whether an assessee who was searched under Section 132 of the Act before 01.02.2021, on whom the statutory notice under Section 153A or Section 143(2) was issued after 31.03.2021 but before 30.09.2021, and who filed a settlement application before the Interim Board on or before 30.09.2021, is entitled to have that application considered on merits.

Arguments Advanced by the Petitioners

Counsel for the petitioners urged the following positions: